8/29 Applying for a home loan now. The loan officer keeps asking why
I wrote large amounts of check, and what they're for, and fax
her proof to support what I said. She said loan regulations have
tightened a lot to prevent money laundry. What is the max amount
of money I can transfer these days without triggering annoying
audits? I am not a terrorist.
\_ Banks have to file a SAR for any amount over $10k.
\_ What if I do a couple of $10k a day? Is that ok?
\_ Not only will that still trigger the reporting, it's illegal.
http://en.wikipedia.org/wiki/Structuring
\_ Just do 10k/day
\_ See above: this is illegal, and also probably won't work.
\_ How about bitcoins?
\_ Does that include transferring between accounts owned by my
and/or my wife, all of which in US institutions?
\_ from the aspect of loan approval, they just want to make sure
you aren't playing funny games like making private unreported
loans or trying to artificially increase your apparent assets by
shuffling money around.

5/13 Does FDIC ever matter? How likely is it that your deposit of
over $250k going to be screwed over in a major US bank?
\_ Was Washington Mutual a major bank?
\_ Was Washington Mutual a major US bank?
\_ Hahahahahahahahahahaha. Good one.
\- As with nuclear weapons, this insurance produces much of its value
just by existing rather than being used. FDIC insurance is largely
to prevent bank runs. Note also the FDIC supervises/assists with
healthy banks taking over ailing banks. There is a really funny
THIS AMERICAN LIFE on this.
As for history, read about the 1980s Savings and Loan crisis.
Small banks tank all the time. --psb
\_ k thx. so if I have 2 accounts of ~= value at the same bank,
I have double the FDIC coverage?
\- if you have more than $250k in a single bank, you probably
should not be getting financial advice from me/motd, but
unless things have changed recently, the limit is per
person + per bank + per "account class" ... the last is
not totally intuitive. a personal saving/checking account
are the same account class, but your IRA is a different class.
so $200k CD + $200k savings = $250k cap. $200k IRA +
$100k checking = $300k coverage. i dont know all the nuances
about this ... like how spouses are treated (this may get
weird if you are a homosexual due to state law varying on
gay marriage) everything in the vague category of individual
demand account etc. --psb
\- hmm, apparently spouses are not treated specially ... the
special treatment applies to real persons, so not fictious
persons like corporations ... or things like estates ...
so the situation may change if the person you shared the
account with dies. --psb
\_ thank you psb, it is extremely helpful!
\_ !psb --psb #1 fan, hoping for a comeback

3/9 In a 15/30 year loan, the amount of payment stays the same but
the payment on interest decreases while the principal increases.
Suppose I decide to pay off a huge chunk of principal, will
the amount of interest I need to pay decrease drastically, or
do banks still want to take out a huge chunk of interest rate?
\_ You don't actually have separate "interest" and "principal"; you
just have a balance. Every month your balance goes up because
they charge you interest (a percentage of your current balance),
and it goes down when you make payments. So yes, if you make
a big payment, your balance will go down and they'll be adding
less interest each month.
\_ This is not entirely true. When you make extra payments, or
when you make a bigger payment than the usual amount, you should
specify that the extra money should be applied to the principal.
Otherwise, the bank is free to interpret that you intend to
apply it to either the principal or the interest, and most banks
Otherwise, the bank is free to interpret whether you intend to
apply it to the principal or the interest, and most banks
will apply it to the interest since it is to their advantage.
The difference is that: when you apply it to the principal, your
remaining principal (i.e. "balance") goes down and the bank will
charge you less interest. When you apply it to the interest,
your remaining principal remains the same and the bank will
charge your the same interest, and you're just paying your next
month's or next-next month's interest extra early.
\_ Wait, really? You're saying when I send the bank a big check,
instead of crediting it to my account (which would reduce
my balance), they might just hold it in limbo and credit it
months later? How is that legal? I guess I'm glad my bank
doesn't do that.
\_ I tried paying off a HELOC (it was only $15K). I owned
something like $12312, so I wired in $12312. The next
month I still got a principal to pay and I was like, WTF?
It turns out that they put in $12112 into principle
and then put in ~$200 into next month's interest rate, and
when time comes to pay, I still owe them principal!
FUCKING sneaky Bank of America.
\_ No, they will cash it and credit it to your mortgage
account right away. But they will consider it an early
interest payment instead of a principal payment unless you
specify that it's a payment towards the principal (e.g. by
checking a checkbox on your payment stub, or by writing
"payment towards principal" on your check.) If you use
automatic payment, you'll need to specify that in the
automatic payment authorization form.
\_ Wow, that's pretty sleazy. Thanks for the explanation.
\_ This is an amortized loan. If you pay off principal then you
will pay your loan off faster but your payment is fixed. I am not
really sure what your question is.
\_ What do you mean by "your payment is fixed"? You can pay as much
as you want each month (above the minimum), and if you make big
payments, you'll end up paying less in total. (Banks hate this,
which is why they sometimes have prepayment penalties.)
\_ i think the op means "the minimum is fixed" -!op

3/6 When I first joined my company, I got a sign-in bonus which was
deposited into my savings account the first month. I also got my
moving fees reimbursed, which was also deposited into my savings
account a few months later. However, neither entries show up on
W2 or any other official records (not even ADP). I asked my boss
if I should talk to someone about this, and he said "don't worry
about it, it's all good." Is it normal for companies to make
deposits without them showing up on any records? Should I be
worried? Is this common or legal?
\_ Ask an accountant. You are probably required to report them on your taxes.
\_ Ask an accountant. You are probably required to report them on
your taxes.
\_ When I need a job done, I go to Home Depot and pick up a bunch of
amigos. At the end of the day, I pay cash. I have no idea if they
report their earnings. The question of legality is moot if
there is no accountability in our financial system.

11/27 Whoa, since when did FDIC coverage go up to $250,000? That's cool.
So is this coverage per customer per bank, per account per bank,
total per person, etc?
\_ I believe that it is per customer per bank. Not 100% sure though.
\_ Yes, and you can get even more with joint accounts, etc.:
http://www.fdic.gov/deposit/deposits/dis/index.html
But if any of this matters to you, you can probably afford
better financial advice than the motd.
\_ $250,000 is not a lot of money these days.
\_ To the 99% is still is.

11/21 I'm trying to figure out how much I save. Does money I contribute
to debt (student loans and car loan) considered money I "save"?
\_ "I'm trying to figure out how healthy I am. I normally
smoke 2 packs a day but now I've cut it down to just
1 pack a day. Does the reduction count towards health
that I hope to 'gain'?"
\_ When you have more going into a bank/CD/investment than
what you spend, then you're saving. If you pay just the
minimum fee (interest only) and put that extra cash into
an investment that earns more than the interest rate,
then you're saving even more! Obviously, it's not easy
to find an investment that 1) earns more than the interest
rate and 2) is stable/consistent/predictable. So if you're
not confident that you can use that extra $$$ to earn
a higher rate than the interest rate, then paying the
principle will reduce your loan. You are in essense saving
as much as you can.
\_ WTF? Fuck no. I can't believe I'm hearing this. You have
asset, and you have liability. Your loan is your
liability. So is taking a mortgage even if it's worth a
lot. When you pay off some principle, you are decreasing
your liability. People who have a lot of cool shit aren't
rich. They usually have a lot of liability. The more
liability/asset ratio you have, the less likely you'll save
due to having to pay off interests. In another word, if you
have a bunch of loans (car, student, house, etc), you are
in debt. You are POOR, and trying to get by your life by
trying to decrease your debt. If the loan rate is
significantly higher than say, CDs, then it's usually a
better strategy to maximize paying off your car loan +
student loans than trying to put them in CDs. In another
word, by taking loans esp. on items that have no room for
appreciation (cars, boats, etc), then your are throwing
away money. You are poor.
\_ That was hilarious, thanks! Btw, my student loans
aren't cool shit. All I got for it was attendance
at Cal, which in the end just got me an account
on this server, putting me in touch with a complete
poser like you.
\_ I have asset. You have debt. Enuff said. -poser
\_ Your English language comprehension ability
has been rated as: pathetic.
\_ My mother spends a lot of frivolous things. She goes to
high end stores, looks at the price (let's say, $1000),
then goes to the lower end stores and buys a bunch of
things (let's say $200). Then she rationalizes that she
just saved $800. This is the exact reason why uneducated
women are stupid and cause the whole family finance to go
down. I vowed to never marry someone like my mother. I'm
tired of paying off her loans.
\_ you're an idiot.
\- You're a dick and an idiot. -!pp
\_ I'm on the same boat, except that it's both of my parents
instead of my mom alone who are like this.
\_ moral of the story: don't marry into a good looking but
very white/bimbo/trash family
\_ my mother just called me to borrow money, but IT'S OKAY!
"My adjustable rate just went down and I'll save some money
1 "My adjustable rate just went down and I'll save some money
so everything will be fine!"
Someone PLEASE kill me.
\_ I think he is "saving". Saving is a concept from analyzing your cash flow.
If you have more income than spending, you are "saving". How that flows
to your balance sheet, by paying off debt or accumulating assets, is
a separate issue.

9/29 So let's say I have some money, about $100k. What are some things
I could do with it? What do you guys recommend?
\_ Hookers and blow
\_ Guns, ammo, MREs, to prepare for the coming apocalypse!
\_ I am thinking about buying some gold.
\_ Gold is a bad idea right now. The inflation hedge is
already factored into the price. There are other assets that
are also a good inflation hedge that aren't in a bubble. Such
as real estate. (The bubble there having just burst.)
\_ quit your job, move back home, and do your own startup.
Realize that the sooner you stop working for DA MAN, the
less likely you'll run into mid-life crisis in your 30s.
\_ I would like to start my own business, but probably not
a startup.
\_ So, like, restaurant would be in your opinion your
own business, but not a startup? A startup doesn't
necessarily mean a TECH company less than 100 person.
\_ Let's say I bought a McDonalds franchise, would that be
a startup?
\_ uh, no. If you don't know and don't care, it's
better than you stick to working for THE MAN.
\_ What?
\_ Wait a couple more months, then use it as down payment for a rental
property.
\_ This is on the short list.
\_ Keep it in a savings account as a contingency fund and for
a down payment for the next time you sell and buy a house?

5/18 What's a good bank with decent interest rate for savings or MM?
I'm looking for something that's not too inconvenient (with tellers
within 20 miles of major cities) and with higher interest rates
than BofA and Wells Fargo.
\_ Isn't there a canonical approach to keep a small amount of money
~$1000 in a large bank with prevalent ATMs and keep the bulk of
savings in a bank with nice interest rates and you can just
transfer back and forth as needed? I have it all in a BofA
account right now, but I don't have a lot of money so that makes
things easier. Just pick any bank with nice interest rates and
online tools for money management and you should be set. -mrauser
\_ i think the problem is there aren't any decent banks with decent
interest rates

4/9 Wife and I have about $5000 combined savings. We're poor. What's a
decent checking or savings account to open?
\_ http://gmacbank.com is a pretty good value.
\_ http://gmacbank.com is a pretty good value. they almost always pay a pretty
competitive rate. one of the account types offers limited
check-writing and ATM fee reimbursements. the other doesn't, but
pays a higher rate. i have both, and just transfer funds as needed.
their website is decent and no-nonsense. the only thing i don't
really like is the lack of electronic statements.
\_ A credit union. They don't do stupid things like buy Credit Swaps,
so your money is safe. I like Patelco.
\_ I'm a Patelco member. Know why? My credit union went belly
up and Patelco ended up with the corpse.
\_ Your money is pretty safe anyway as long as it's federally
insured. A lot of credit unions have pretty crappy rates.

3/19 Can someone explain how this does not end up as Weimar or Zimbabwe?
http://www.iht.com/articles/2009/03/18/business/fed.php
\_ Because hyperinflation is not the same as inflation. The idea
is to create some inflation to fight the deflationary trend.
(Note: this scares me too, but let's not unrealistic Chicken
(Note: this scares me too, but let's not be unrealistic Chicken
Littles)
\_ I realize the plan is to create an inflationary trend to prevent
deflation. However, this seems to me to be flapping our arms to
avoid hitting the ground. -op
\_ The alternative being?
\_ A different analogy. -op
\_ Because the total money supply (credit plus currency) is currently
contracting and this extra $1T is less than the amount of credit
that has been withdrawn from the economy.
\_ The Jan & Feb CPI updates both say that inflation is occurring,
after 6 months of deflation. How do we know when enough money
has been injected vs. not enough? -op
\_ That is a good question, but I am sure the Fed has an answer.
Probably when the inflation rate is "high enough" which is
at least 2%/yr, probably more like 3-4%. There is a risk of
overshoot, of course, but the deflationary forces are so
strong worldwide, worrying about hyperinflation is pretty
silly, imho. The BOE, BOJ and EU banks are all doing the
same thing, btw.

2/20 Interview with Peter Schiff (economics, 2008)
http://blog.mises.org/archives/008039.asp
\_ gee, a government-is-evil site has an interview with a
government-is-evil guy. how useful. -tom
\_ How's that hedge fund going Petie? OOOOPS.
\_ Peter wants to go back to the Gold Standard. I agree with that.
\_ You mean you agree with Mr. My Hedgefund Completely Imploded?
Yeah, he sure seems like a *smart* guy.
\_ You can be right about some things and wrong about others.
You can also be right but get the timeframe wrong.
Hedge funds make bets that are inherently uncertain.
\_ He was a consistent bear from 2002 until now, so he was
dead wrong for five years. A stopped clock is right
twice a day. -tom
\_ One could correctly recognize the dot com bubble, oil
bubble, and housing bubble. It's much tougher to know
when it would pop, and what the world reaction would be.
\_ Exactly. I thought <DEAD>dot.com<DEAD>s were overpriced and
yet they kept going up and up and up! Eventually,
I was proven right but the devil is in the details.
\_ Well, I guess that justifies being a fringey Austrian
econonomics nutcase.
\_ Peter Shiff Was Wrong
http://tinyurl.com/ca3gkr (Mish's blog)
\_ Yeah, basically, Schiff was wrong about just about everything.

2/19 I believe in the latest edition of dictionaries, next to the
definition of "batshit insane" there is a picture of
Rep. Michele Bachmann (R-obviously):
http://tinyurl.com/btd698
"We're Running Out Of Rich People In This Country"

2/19 http://freakonomics.blogs.nytimes.com/2009/02/18/let-the-human-capital-exodus-begin
\_ Suppose you are a damn good executive. Someone gives you the
chance to come in to a ailing firm that has a long history and
some serious pluses going for it. If you manage to turn things
around in a 5-10 year time frame you will be heralded as a
brilliant mind and even the elite will treat you like royalty.
Would you walk away from that oppertunity because you will "only"
get 500k a year until things get better? If so I don't think you
are the kind of person that these companies need right now.
(why the fuck did you delete this?)
\_ The words banking, innovation, talent, used together is nothing
but an oxymoron. Give me a break. We used to think that energy
derivatives was a brilliant idea. Ditto with 0% down 0% interest
loan. Yeah, we made TONS of money because of 0% down 0% interest,
it's such an innovative financial product! WHOOPY!!!
\_ Finding new ways to use renewable energy = innovation.
Finding new ways to make money by giving out unsound
and unsustainable loans = innvation? Give me a fucking break.
\_ I think the post above is agreeing with the three comments above.

2/19 "There is no scenario under which you would claim the government was
not involved ... -tom"
\_ Apparently there is no scenario under which you would agree
government policy has a hand in creating financial crises.
My point isn't about getting rid of the government itself
but the banking system supported by governments around the world.
These crises keep happening around the world and yet people always
find something to blame except the actual system. It's like
building your house next to a flood zone and then blaming the rain
when your house inevitably gets trashed.
On the surface, you can blame banks in these crises because we
always get these situations where banks create massive amounts of
debt based on overvalued assets. This is natural because greed is
natural. The problem is a) they are shielded from the consequences
and b) the govt-sanctioned system allows them to pyramid debt upon
debt in a tremendous explosion of newly created money, and a
tremendous skewing of the economy's fundamentals (trade balances,
capital allocation).
In a conservative system (not talking GOP or Dems here) a series
of failures would simply not be able to cause such deep problems.
After you unwound the failures then you'd still have the same
basic money supply in the economy.
With the current system, you are putting an impossible regulation
task onto the government. The current crisis is really an
extension of problems that have been building up for decades.
In the latest episode the Fed kept interest rates too low for too
long.
\_ Not a "conservative system", a "free market system". The free
market cannot work unless there's profit AND loss. Oh, and the
government shouldn't tell the companies to do something
unprofitable and then blame them for it.
\_ http://tinyurl.com/c83pfd (The Economist)
Your lefty fellow travelers over at The Economist don't seem
to agree. Financial crises are as old as capitalism.
\_ That article doesn't even touch on the issue of the banking
system itself. It's mostly ignored by all mainstream
sources as if it must be, always has been, and always will.
There's no proof that this credit expansion system is
really a benefit.
This isn't really a left/right issue either. The only people
who talk about this kind of thing are, I guess, libertarians.
\_ What are you talking about? Every macro econ class talks
about money supply. Read Chapter 13 of Keynes General
about money supply. Read Chapter 17 of Keynes General
Theory for the first modern discussion of it, but so did
Friedman, Von Mises, Krugman, all the greats. It might be
true that libertarians (and their fellow travellers, the
Austrians) are the only ones who seriously consider that
fiat money and franctional lending are a bad idea. Do you
notice that no one in the world is on the gold standard?
That is because it is a crappy way to run an economy, full
of booms and busts far worse than what we are experiencing
today.
\_ There's no evidence it's a crappy way to run an economy.
The real reason is very simple. Government inflation of
the currency is a hidden tax on holders of money. Govts
used this repeatedly in times of war, though they
usually returned to gold afterward. This is just a
fact, look at the history of about every major British
or US war. They inflated the currency tremendously in
WWI, then tried to deflate it again afterwards which was
doomed to failure.
This is also orthogonal to fractional reserve banking
where demand deposits are treated as bank assets,
and the money supply is exponentially expanded via debt.
There is no evidence this is needed or even beneficial.
Most of the historical problems, if you look into it,
were either a) not really crises or b) not actually
a free market gold standard.
The deflationary spiral problem is endemic to fractional
reserve inflation, so is the risk of widespread bank
failures. Banks today, in general, are not allowed to
fail. We pay for their mistakes via the government
bailing them out in one way or another. It's private
profits socialized losses. But actually this has been
the case for hundreds of years... because it wasn't
nipped in the bud, it's always been too painful to undo.
Govts bailed out banks many times in history.
\_ You imply that having a hidden tax on holding money
is a bad thing. I would argue that we don't want
people hoarding money a'la Scrooge McDuck.
\_ Let's see you argue it then.
\_ If you are not familiar with the historical poverty
of humanity and the many long periods of depression
and famine before 1900, then I cannot hope to type
enough words to educate you. Go read a history book
or something. The explosion of human wealth since the
invention of capitalism is really unprecedented.
\_ Capitalism is not synonymous with central banking.
There are no periods of famine and depression that
can be blamed on a lack of central banking.
You're also placing credit on "capitalism" when
there are so many other technological advances in
the same time frame.
\_ What do you think that the "capital" in
capitalism represents?
\_ Not central banking, that's for sure. Why,
what do you think it represents? Is this
a joke?
\_ Do you even know why we went off the gold standard?
\_ So that the gov't could inflate the currency whenever they
wanted.
\_ It all sounds like funny money to me.
\_ Is it better when completely random effects inflate the
money supply? (Someone discovered gold!) Or, even worse,
business as usual deflates the money supply? (Hold amount
of gold constant, increase GDP, automatic deflation!)
\_ You don't need a gold standard. The money-is-debt, fractional
reserve thing is mostly orthogonal to having a gold standard.
You could still have fiat money but make it non-debt based
(i.e. just directly create X amount of money by fiat).
A gold standard is a separate debate. Many arguments against
it are bogus though.
We left the gold standard so that the government could
finance wars without worrying about taxes or voters.
\_ Are you getting paid by the word? -tom
\_ I should be. My day job is boring, I guess.
\_ what is this quote from?
\_ an earlier motd thread

2/10 Why tax cuts are a bad way to stimulate demand in a deflationary
environment:
http://tinyurl.com/ccatun
(Freakonomics Blog at NYT)
\_ Oh sure, you can't trust people with their own money.
http://www.youtube.com/watch?v=zISKoQegbxM
\_ No, you can't, when the collective interest is
diametrically opposed to the individual's interest.
We, collectively, need the economy stimulated.
However, we, individually, don't want to spend our
However, we, individually, want to save our money
money to maximize our personal financial security.
So, right now, you can't trust people with their
own money.
\_ Is this why the fed has racked up debts that work out to
over $30,000 per capita?
\_ How large are the debts that the private sector has
racked up?
\_ People know what they need and don't. We've been living in a
mode where people spend way beyond their capacity. Retreating
from that is normal. Deflation is good. We have tons of
immigrants and an inefficient culture of buying tons of
cheap crap.
"Deficient aggregate demand" isn't a problem. We still have
a huge trade imbalance so there are plenty of jobs we could
theoretically be doing instead of importing all that shit.
But the only way that would happen is if we let conditions
move towards equilibrium instead of borrowing trillions to
prop up the status quo.
\_ You almost make some sense. Good thing you aren't running
the Republican party or I'd have to vote for you.
\_ Do you think that people knew what they needed and what
they didn't need when they decided to leverage up buying
McMansions, flipping houses and buying SUVs? How about when
they bought all those exotic financial instruments which
bet on the housing bubble? Do you know what a deflationary
trap is? What you are advocating would put us in one,
the same as Japan post-bubble, and would give us our
own "lost decade" or two.
\_ People did that because it was what makes sense to do
given abundant cheap credit. The government's policies
steered the market towards cheap imports and housing
instead of real industry -- not only our direct
policies but how we allowed e.g. China to manipulate our
own economy. See:
http://blogs.cfr.org/setser/2009/02/02/it-wasnt-just-the-market/#more-4618
Of course long-term deflation is not good. But if it
wants to happen there's no point going around trying to
ignore the laws of gravity. We should look for ways to
cushion the fall and set things up for long term success.
The previous economy (dot com then crazy mortgage bubble)
was based on a tremendous amount of imaginary wealth.
To keep on pretending just prolongs and exacerbates.
The ideas you're talking about is the thinking that lead
us to where we are.
\_ No, it was a deliberate decision by the GOP to
deregulate the financial sector which led to the blow-
up in available credit, more than anything. There were
certainly other contributing factors, but that was
number one. To lower the Debt/GDP ratio, you can try
to lower debt or raise GDP. Your plan would try and
lower debt, but probably lower GDP even more - that
is what has happened in the past when debt bubbles
have been allowed to pop without any attempt to
clean up the mess afterwards. There is a chance that
by reallocating capital to more effective uses, we can
grow GDP and reduce overall debt that way. Most of
the increase in govt debt recently has just been a
shift from private to public hands, so has not
increased the overall debt burden to the US economy.
This is not guaranteed of course, a lot of it depends
on how good a job govt does in allocating capital to
productive uses. It is hard to imagine that they would
do a worse job than the private sector has over the
last decade, but anything is possible.
\- you can blame the GOP for some crazy tax policies
gutting enforcement funding or "capturing"
regulatory agencies and most of deregulation, but
there is a lot of blame to go around on dereg
and mkt fundamentalism. i'd be ok chaining
robert rubin and phil gramm together and sending
them off into interstellar space.
\_ Please see the Commodity Futures Modernization
Act of 2000.
\_ Even given the deregulated system,
there were clear lapses on the part of the
regulatory systems that did still exist. And
failures on the part of private regulators like
S&P. I believe part of that is simply a lack
of competition -- the need for government
oversight is directly related to market health.
Markets don't know what's productive, they just
tend to maximize utility in terms of profit. If
the environment is skewed the result is skewed.
It's like when "kind" people put out food for
animals; the animals will base their "economy" on
maximizing this free benefit. They don't
understand why there is free food, so they can't
understand that it might go away, or that the
humans might round them up and gas them.
Low interest rates, perpetual borrowing, and
China's market manipulations are our free food.
Even now China keeps investing in overcapacity and
trade surplus.
The deregulated financial industry made mistakes,
but basically it was drunk on the free shit.
Cheap credit was influenced by the trade deficit.
The Fed also maintained relatively very low
interest rates even while the housing bubble was
growing insanely fast. Greenspan denied that there
was a bubble. The government was basically telling
people that housing was the place to be.
\_ Look, you ideological nitwit; the housing bubble
is *not* the cause of our financial crisis.
\_ I rather think it is. If housing recovers
then all of these problems instantly go
away. Loose credit and low interest rates
combined with fraudulent mortgage lending
practices and dishonest borrowers are at
the heart of the problem. If you want to
know where most of the $$$ went, it went to
anyone who sold a property in the last 5
years that they had owned more than 5
years prior. Some of it when to speculators
and some of it went to people like you
and me whose house value doubled in a few
years. When salaries and real estate prices
match more closely then this will all blow
over but not until then. Leverage just
made things worse by wiping out capital,
but those speculators had a good run prior to
that so some should weather this. Some won't.
C'est la vie.
\_ We have had credit bubbles that did not
involve housing and we have had housing
cycles (bubbles?) that did not bring down
the financial sector. Unregulated and
overly risky speculation is what brought
down the financial sector, mostly the IBs
and hedge funds leveraging 30:1 on their
bets.
the financial sector.
\_ S&L crisis?
This isn't the first time Citi has
borrowed from the gov't either.
Was 1991 the last time?
This crisis is more severe because
the bubble was bigger, partly
because interest rates were lower
and other instruments were
underperforming or viewed as
risky. That's all. CA has had housing
bubbles that popped, but this is new
to most of the country.
Financial institutions leveraging themselves
ridiculously is the cause of our financial
crisis. Oh, if only the government didn't
exist, the invisible hand would have made sure
that the banks acted safely!
Here's a news flash: The financial crisis
*IS* THE FUCKING INVISIBLE HAND. The free
market is perfectly happy to drive off a cliff
and destroy a society. Government's job is
to make sure that doesn't happen. -tom
\_ Leveraging wasn't THE cause; misclassifying
risk was the cause, and is directly
related to the housing bubble. And the
mother of all the leveraging is the fed's
low interest rates.
The financial crisis is not the invisible
hand because government was riding
shotgun the entire way. Or more accurately,
the government was building a bridge to
the promised land out from the cliff, but
actually it went into thin air.
In any case you are arguing a strawman: I
am not arguing that gov't regulation is
unnecessary. I'm saying it didn't do its
job.
\_ Yeah, whatever. How about this: Could
you describe a possible scenario where
the free market, by itself, could cause
a financial crisis? Or is that
impossible? -tom
\_ Obviously yes, with banks: bank runs.
Although modern banks are completely
married to the government via the
central bank, and via the laws that
allow them to create money and lend
money that they simultaneously owe
to their depositors. That's not
really the free market; it's inherently
unstable, and supposedly the govt is
managing this in order to be able to
easily stimulate the economy.
It is theoretically possible to have
banking which is not based on the
current scheme.
http://mises.org/Books/mysteryofbanking.pdf
You can't honestly have a free market
without a hard currency and a situation
where actors are held accountable for
their dealings.
A market run on an arbitrary government
fiat currency is inherently not free.
If banks were required to lend money
out of their own capital instead of
their customers, or else enter specific
contracts with customers to lend their
money, you could not have bank runs.
\_ Go sell it at Top Dog. -tom
\_ The model of modern corporations
is too conducive to disaster.
Responsibility is abdicated onto
a non-person legal entity, and
management transfers between
speculators who individually
do not have full understanding
of the business, but neither
stand very much to lose. The
executives and employees stand
to profit greatly from short
term schemes which are measured
by quarterly results.
Then you have the abomination of
"government sponsored corporations"
like
http://en.wikipedia.org/wiki/Fannie_mae
How can you say that the fin.
crisis is not directly related
to the actions of this agency
and the govt that created and
controlled it?
\_ Fannie Mae was a drop in the
bucket (and late) compared to
the total amount of CDOs
written. You should have
stopped at "bank runs have
happened long before there
was government regulation of
banks." Tell us how Tulip
Mania was big ole' gubmints
fault.
\_ Fraud and speculation are
not limited to the govt,
no, but the govt allows
for a special depth of
scope. Nothing's wrong
with a periodic recession.
But the govt banking scheme
creates vast money supply
variances which is what
creates a crisis.
\_ Prove it.
"Whether the U.S. had a central bank or not, the banks were _/
assured that if they inflated together and then got in trouble,
government would bail them out and permit them to suspend
specie payments for years. Such general suspensions of specie
payments occurred in 1819, 1837, 1839, and 1857..."
US banks are on the government's credit teat, and mommy government
always saves them, or at least the vast majority of them. And it
lets them multiply credit exponentially.
There's no real benefit to all that credit. It just inflates prices
and gives the fed. government a backdoor tax method.
Here, listen to FDR trying to explain away banking fraud.
http://www.fdic.gov/about/history/FDR_Fireside_Chat_Banking_Situation_03-12-33.mp3
Money as debt.
http://video.google.com/videoplay?docid=-9050474362583451279
Mystery of Banking
http://mises.org/Books/mysteryofbanking.pdf
\_ that's not proof of anything; it's pure assertion. And it very
specifically does not address the question, which is whether
a crisis can be created without government intervention. (Hint:
it is completely obvious that a crisis can be created without
government intervention.) -tom
\_ I don't need to prove anything, I'm not your slave and your
question isn't "the" question. Hint: all the major crises
in US history were entangled with the government. Your Tulip
example was not a crisis and is anyway half legend.
You're going around calling people idiots making assertions
but demanding that others "prove" things (hint: no economic
theories have ever been "proven"). But you have the status
quo mainstream theories which you accept as gospel even though
repeatedly they have failed to prevent massive crises. I
don't claim that you can't have economic problems, that's not
a relevant question; an alternative system does not have to
involve 100% protection from recession for example; in fact
it's likely that recessions are necessary for healthy economy.
Only if some fail is competition meaningful.
\_ I didn't mention tulips. "All the major crises in US
history were entangled with the government" is tautalogical;
the US has a government that ideological morons like you
blame for everything. There is no scenario under which
you would claim the government was not involved, therefore,
the government is always involved, therefore, the goverment
is bad. QED. Or not. -tom
\_ How ironic that you blame government response to financial crises
as being responsible for creating these crises. Do you blame the
fire department for fires, too?
\_ If you weren't an idiot, you'd realize that's not what I said.

2/9 motd finance whizzes, if the total value of CDS last year was
62 trillion, and now it's basically worthless, does that mean
somewhere, somehow, someone collectively has lost 62 trillion?
thanks
\_ Yup. Somehow, somewhere, $62T of money just went with the
wind. And what's more, if people suddently decide that CDS
is worth something again, that money comes right back.
\_ These things are supposed to net out, so for every loser, there
should be a winner. Some of the losers are bankrupt though and won't
be able to make good on the claim. Your second proposition "now
it's basically worthless" is dubious, btw.
\_ Who are these 'winners'? Also I'm asking a real question, not
being an ass. thanks.
\_ I understand that you are not being an ass, but you are
repeating some common misperceptions here. If I buy a CDS
from you, giving you some cash up front in return for your
promise to make me whole if GM goes bankrupt and I lose the
money on a bond I just bought, and then GM goes bankrupt, you
are the loser and I am the winner. Is that clear enough? Now
if I go to redeem my claim and you declare bankruptcy, then
we are both losers, which is what people are afraid of now.
We don't know what this "counter-party risk" really tallies
up to right now, which is why the economy is in such a mess,
but it is certainly less than $62T.
\_ I disagree with you about this being a "zero sum" game. Here,
I definitely think there are losers without there being any
winners. Suppose suddenly all stocks are worthless. Who
wins? People who just got out of stocks might consider
themselves lucky, but they didn't directly benefit from
stocks going to zero: they won "otherwise". Short sellers
might win, but that's a small fraction of the loss, not a
zero sum.
\_ Stocks aren't very much like CDSs. If I redeem my CDS to
you and you honor it, you lose money and I gain it. The only
way there can be an overall loss if via counter-party risk
e.g. you don't make good on the contract.
\_ Why do you think they are worthless (URL, please)? They are still
enforceable contracts, unless written by Lehman. They also aren't
"supposed to net out." That was the undoing of the ibanks. They're
supposed to be underwritten by people who can price the risk of
default accurately. They're like tradeable insurance.
\_ Yes, for every person losing a dollar, another person gains
a dollar. That is what "net out" means. The $62T didn't just
disappear, except in bankruptcy cases, where it can be argued
that it never really existed in the first place.
\_ Correct me if I am wrong, but the costs of insuring debt
fluctuates because these things are traded. Worse,
derivatives based on these things were traded.
\_ Yes, but their book value is not $62T, just the nominal
value.
\_ I would argue that most of the value of the 72T CDS market is/was
imaginary, and therefore all of the profits and jobs and stock
fluctuations based on CDS trade profits are a load o'crap,
and this is a huge contributing factor to current financial woe.

2/3 Need advice on where to put cash for 1 to 2 years. I only have
maybe $50K (I'm not a rich old geezer like most of you). CD is
at an all time low. So is money market/savings. Gold? Silver?
Foreign investment? Don't tell me to buy a home, I need a job
for that.
\_ teak rainforests!
\_ If you are expecting to need it in the next 1 to 2 years, CDs
are the way to go. If this is your only cash (you don't have
six months of expenses saved up) then you probably want to keep
most of it in savings even. How do you plan to pay your bills
until you get a job?
\_ How safe is safe? At this point probably only deposits
(checking, savings, CDs) and US treasurys (you might look into
i-bonds or TIPS) have a high probability of no loss of
principal over the next 1-2 years.
\_ Just because you don't have a job, doesn't mean that you can't
invest it in realestate. I have a property that I'm about to
purchase which I need to go all cash in on...I can offer you 10%.
-scottyg
\_ If you're 100% sure that there's positive income, no
accidents, no renovations required, no eviction, etc, then
obviously you don't need a full time job. But everyone needs
some cushion, and 50K isn't a lot of cushion to do any real
estate transaction in California. It only takes one bad
tenant and 0 income to really screw your life up.
\_ No, I mean I will offer you 10% on a 1-2yr loan of 50k.
\_ IngDirect checking gives 2.2% if you have $50K. FDIC insured,
that's what I'd do.
\_ link:dollarsavingsdirect.com is still maintaining 3.5%
http://provident-direct.com is down again to 2.82%
\_ Gold is up 5-8% in the last 3 weeks
\_ http://www.bankrate.com/brm/safesound/thrftmm.asp?fedid=137915
I'll stick with ING, thanks.
\_ http://www.bankofinternet.com looks pretty good at 3.10% and ***
Sometimes I wonder about these outfits, if they will
maintain a good rate over time. There are some 5-star
banks on bankrate's list with better rates than ING.
I do wonder about a bank whose name is basically Engrish.
(bank of internet?) but apparently it's been around a while
\_ What do you really care as long as it's FDIC-insured?
In case you haven't noticed how bank failures are handled,
there is typically no interruption in availability of
funds, except maybe over the weekend.
\_ Not true in IndyMac's case. If you had $10K you'd get it
right away, but for larger amounts, they'd give you a
little upfront and then you had to wait for the rest.
\_ Gold
\_ heroin!
\_ ammo
\_ Ammo doesn't have good resale value.
\_ pre-owned ammo?
\_ when the zombies come.. ammo will be worth its weight in gold
\_ who said anything about selling it? yer supposed to give
it away, at high velocity...

1/28 Pork bill passes the House, no R's vote for it.
\_ which pork bill?
\_ Yay, fair and balanced NPR:
http://www.npr.org/templates/story/story.php?storyId=99919378
Also, GOP apparently unclear on definition of pork.
\_ Even Chris Matthews called it one big earmark.
\_ The fact that you think he represents informed liberal
opinion says a lot about you.
\_ Pell Grants are pork?
\_ Apparently the R's haven't heard that old adage about
holes, shovels, and digging.
\_ Apparently, you're an idiot.
\_ Thanks for playing anyway.
\_ I think Democrats should of tied the "Pork" bill along with
should've or "should have" -- ...
TARP and Auto bail out. I failed to understand why money to
investment bank / commercial bank (e.g. TARP) is not considered
"pork" by Republicans while putting money into infrastructure is.
\_ Bankers donate money to the Republican party, but construction
workers do not.
\_ I wasn't particularly pro-bailout, but there are a few important
differences. The bailout money was often used in ways that
might come back. (Loans, stock, etc.) The bailout was also a
targetted attempt to have an immediate effect on a vital piece of
the economy. No capital and capitalism doesn't work.
Infrastructure may take years to even begin construction, that's
not a quick action. The stimulus bill also also is not
particularly targeted. It seems to chuck a billion or two to
anyone the dems like.
\_ As opposed to $18.4 billion for bonuses for the investment
bankers who got us into this mess. -tom
\_ tom prefers life in the mud.
\_ Yawn. Justify your side's naked corruption by pointing out
the other side's flaws. How exciting.
\_ what in the stimulus bill is naked corruption? -tom
\_ I already told you. Pell Grants. -!op
\_ I see: funding golden parachutes for
millionaires is OK; funding higher education
for the poor is naked corruption. Great.
Enjoy losing in 2012. -tom
\_ This number is bandied about, but what does it mean? I
read it is about 50% less than last year. What is the
average size of the bonus awarded and what is the base
pay? For instance, if total payroll is $1T (say) then
$18.4B in bonuses seems small. Or even if total
payroll is $18B then $18B in bonuses can still be
small if it is spread over 1M employees. I don't
sympathize with the banks, but this number is thrown
out there without much explanation. Were these bonuses
all cash or was there stock or options also awarded?
It costs the bank no cash to award someone $1M in options,
for instance.
all cash or were stock/options also awarded? It costs the
bank no cash to award someone $1M in options, for instance.
\_ http://www.nytimes.com/2009/01/29/business/29bonus.html
The number is based largely on personal income tax
collections. It excludes stock options. -tom
\_ It almost doesn't matter what it means, other than
this: the guys who ruined our economy, destroyed their
companies and lost trillions of dollars are being
rewarded with bonuses.
\_ I think the word "bonus" is what trips people
up. It's just salary. It's more in good years
and less in bad years, like you might expect.
It will never really be zero any more than
you can expect those people to work for free no
matter how poorly they are performing. Certain
professions earn a significant amount of salary each
year in a lump sum "bonus" and it's not quite the
same thing as if you or I get a bonus at work.
For example, my sister's ex-husband worked for a
law firm and every year they got a "Christmas
bonus" of 1 week's salary. It's common in law
just as in banking. Eliminating the bonus is
equivalent to cutting salary. Would it make you
feel better if they said they were reducing their
"base salary" 50%? That's essentially what is
happening. Their salary is tied to performance,
but that doesn't mean their poor performance = zero
salary any more than yours should be. If they
perform poorly enough they will be fired and
many have been. BTW, the average bonus was $112K,
which was down 36.7%. Sounds like a big pay cut
to me. Did you get a 37% pay cut because your
company's revenues went down in the poor market?
many have been.
\_ What was the average base pay? The bonus could
go to zero and these losers would still get paid
more than enough. Using taxpayer dollars to
give incentive-based pay to people who drove
their companies into bankruptcy and the entire
economy into crisis is absolutely, completely
indefensible. And then to attack Pell Grants!
I suppose the conservative strategy of asserting
things too ridiculous to argue against is still
in force. -tom
\_ 1. I didn't attack Pell Grants.
2. I like how you say their pay would be
"more than enough", comrade. I think you
could survive on half your current salary
and in a studio apartment instead of a
house, but the market values your services
more than that. I read that the average Wall
Street salary is around $300K with a base
salary of $100-250K. So it's reasonable
to think a typical package might be $150K
base salary and a $150K bonus. If you
eliminate the $150K bonus entirely then
base pay is still more than enough to live
on, but likely far less than what it would
take to retain top talent. Heck, you can
barely get a sysadmin for City of SF for
$150K. Lots of these guys are Harvard
Business grad with years of experience
who fell prey to the whims of their
CEOs who decided to use a lot of leverage.
The CEOs should suffer. The rank-and-file
traders and bankers are suffering
enough if you pay attention to how many
are out of work now.
\_ No, they haven't suffered enough. The
banking sector is still bloated and
overpaid. There is no particular reason
that a Harvard MBA should make $300k,
unless he is contributing that much to
society. For the last 10 years, the
bankers have disastrously misallocated
capital. If they don't like mere $150k
salaries, good luck finding an industry
that will support them in the lifestyle
they think they deserve.
\_ http://tinyurl.com/ajf25h (WSJ)
\_ People aren't paid according to
"what they contribute to society".
Most of those guys are very smart
and will find something else to
do, which would leave the banks
run by people less capable. You think
it's bad *now*?
\_ I don't think there's any evidence
that the people running the banks
are very capable. If they're so
fucking capable, why are they all
going bankrupt? The argument about
"that's what it costs to retain
top talent" is 100% bullshit.
The system is rigged. CEOs, VPs
and hotshots get to decide who to
pay what--and, surprise surprise,
they decide that it's vital to
the interest of the company to
pay CEOs, VPs and hotshots more
and more as a function of total
revenue and earnings. Until the
whole thing comes crashing down
and they ask the government to
bail them out. The absolute first
thing that should happen before
any bankrupt institution is bailed
out is that all performance-based
pay should be immediately suspended
until the company is solvent. If
that means that executives leave
for other companies that managed
their assets better and therefore
aren't going bankrupt, that's fine;
isn't survival of the fittest one
of the tenets of the market
economists? -tom
\_ Lots of free-market cheerleaders
seem to forget the basic econ 101
stuff that says what is needed
for markets to function. Namely
competition and low barriers to
entry.
What is it about these banks that
makes them able to keep fat
profits year after year?
\_ Somehow society was able to function
with a banking sector that was half
the current size - as a proportion
of the economy - for many decades.
All those Ivy geniuses can go find
another way to game the system (and
ultimately rip off the taxpayer, no
doubt). Almost every "invention" of
the financial sector in the last 10
years was crap. Is it seriously
your contention that these guys
deserve lifetime employment on the
public dime at $300k/yr, even though
what they produce has no value to
society whatsover?
\_ Somehow society was able to
function with a banking sector that
was half the current size - as a
proportion of the economy - for
many decades. All those Ivy
geniuses can go find another way to
game the system (and ultimately rip
off the taxpayer, no doubt). Almost
every "invention" of the financial
sector in the last 10 years was
crap. Is it seriously your
contention that these guys deserve
lifetime employment on the public
dime at $300k/yr, even though what
they produce has no value to
society whatsoever?
\_ I don't think they deserve
lifetime employment on the
public dime forever. I never
said that. However, letting
the big banks BK would be a
disaster. This whole thing
about bonuses is a PR stunt
as is Obama's outrage. Banks
are going to need $1T and we're
worrying about $20B in bonuses
that were earned? Do you really
contend that banks have no value
to society?!
A bank that does a good job of allocating _/
capital to productive uses has a value.
Do you think that the primary inventions
of the financial sector of the last decade
or so (CDS, CDOs, SIVs, etc) have had a
net positive value? If so, why are all
the banks collapsing? If anything, the
total contribution to society by the
financial sector over the last decade
has been strongly negative. This is
reflected in the change in their
equity value, and in the collapse in
value of all the stupid things they
allocated capital to (most exurban
McMansions, but also the mostly
speculative paper instraments used
speculative paper instruments used
to gamble on them).
\_ http://tinyurl.com/ajf25h (WJ)
Check out the comments. Even the WSJ readers
are getting restless.
\_ Just the media stirring up shit and now the
rabble is roused. What about bailing out
auto workers who made shit cars? I know a
lot of people are against that, too, but
at some point you have to place blame
where it is due, which is management. The
auto workers were just building the cars
they were told to build. Likewise, the bank
employees were just selling the products they
were told to sell while the government
cheered from the sidelines about how many
more people could now afford home ownership
while keeping rates insanely low and wasting
$$$ in Iraq. Blame Bush for this mess.
\_ It is funny that you think that the
readership of the WSJ is "the rabble."
You can imagine what the actual rabble
think of the bank bailouts.
\_ Doesn't matter what they think. They
don't realize what will happen without
lending or credit. For instance, most
hospitals use large lines of credit to
cover bills during the period between
when services are rendered and the
insurance companies finally pay. The
average consumer relies on banks for
a lot more than they realize.
\_ In a democracy, what the people think
matters. Especially when you coming to
the taxpayer, hat in hand, asking for
a bailout. The current overleveraged
banks could all fail and all that
would happen is that new bunch would
crop up to take their place. No doubt
the economy needs credit. Why do we
need Citibank, JPM and all the other
crooks?
\_ That's why we have a republic.
We don't need uninformed citizens
making these decisions.
\_ I am mostly unimpressed with
what our elected representatives
have done so far, but you are
probably right, a directly
democratic response would
probably be even worse.
\_ automaker bailout is what, 1/100th of the
bank bailout?
\_ In other industries, you are awarded a bonus for doing well
or if the company has done well in that year. There is no sane
person who can claim the banking industry did well in 2008.
So why did they get bonuses? That's what bugs me.
\_ This is not "other industries" and Wall Street and law firms
work differently.
\_ They work differently because they've stacked the deck in
favor of lining their own pockets. The role of government
is to protect taxpayer assets, not performance-based
compensation for executives of bankrupt companies. Let
them try to convince the bankruptcy court that the first
priority is to pay them their bonuses. -tom
\_ Bankruptcy courts are genrally in favor of companies
making payroll.
\_ Bonuses != payroll.
\_ Except that in the case of certain firms (like banks)
they really are almost the same thing. Bonuses
are not some optional incentives based on merit
or something, although they can be tied to it.
Think of bonuses more like tips for a waitress.
Sure, you make more if you're good but they aren't
really optional. Even bad service results in a
tip (or should anyway) because the payscale and
taxes are based on that.
\_ Bankers don't make $2.80/hr.
\_ This is back to the "They make more than *I*
think they are worth" argument. We can say
that about software engineers or any job,
really. However, that's not how salaries
are determined in this country. Go back to
Soviet Russia. It's much more equitable there.
\_ Except software engineers are not asking
for handouts from the Federal government.
You keep "forgetting" that part.
\_ Tangential. You can argue that companies
shouldn't be receiving aid, but that's
not your argument. Your argument is
that the government should dictate
salaries in turn for aid. That will
leave those companies without any
employees, because paying them 50%
of market rate for salaries will
have them leaving in droves. How
will that help anything? The banks
may as well BK then.
\_ OK. -tom
\_ So let's be clear that your issue
isn't "bonuses". It's that the
banks are receiving any money
at all. Why beat around the
bush for 6 paragraphs?
\_ So let's be clear that you
love to beat up straw men
rather than paying attention.
Fine. I'm not particularly
pleased that the banks are
receiving money, and I'm
outraged that the money
they're receiving is going
incentive-based pay for the
assholes who caused the
problem. And it's totally
typical for the Republican
typical of the Republican
disdain for the American
public. -tom
\_ I seriously doubt that the employees
will be leaving in droves, even if they
were paid the starvation wages of
will be leaving in droves, even if
they were paid the starvation wages of
$300k/yr. Especially since 100s of
thousands of others in their field
will be out of work. But it is a risk
I am willing to take.
\_ Exactly... this is ridiculous.
where exactly are they all gonna
go? The best they might do is
start a new company, or perhaps
use their genius to go to one of
those other lucrative $500k
careers out there, which would be
such a terrible loss for America
I know, our capital would be so
misallocated.
\_ One obvious place is to the
hedge funds and regional
banks, growing them into
megabanks of the type they
work for now. Of course, only
the best will leave. The bad
ones will remain to handle
the delevering, valuation
of assets, and spending of
TARP funds. My fear is that
the best ones are leaving
*anyway*. Wouldn't you?
\_ And if they go to a regional
bank (probably not making
$300k/yr) and grow it into
a well-run company that
efficiently makes loans, has
a well-run risk management
department and is not sucking
off the taxpayers teat, this
is a bad thing how, exactly?
\_ The Bad Thing is what
happens to the banks
they left.
Most hedge funds are closing,
not hiring, btw.
\_ Many are folding b/c
investors are withdrawing,
but this is a blip on
the radar. Mutual
funds, pensions, and
even hedgies still
manage a lot of money.
\_ Hedge funds are closing
because the returns on
their strategy have
dropped to 20% of
the original, rather
small percentage.
In fact, according to
DeLong it was a large
hedge fund getting
out of the business,
which hosed a number
of other highly
leveraged hedge funds,
which acted as the
trigger for the
whole liquidity
crisis. -tom
http://online.wsj.com/article/SB123353536455237761.html
"It's just a tough, tough time, and there are a lot of
good people out there looking for work."
\_ Right, but they aren't going to work for $6.50/hour.
Let's not confuse "looking for work" with "looking
for any work at any price".
\_ I have a friend who does ibanking for UBS, 1st out of biz school,
didn't get fired in the 4 rounds of layoffs, I was adding up
her base salary (120k) to the bonus she got 140k and wondered
what the hell she did that was worth 260k a year.
\_ Is she hot? picsP

1/22 What happens when the government takes over your bank?
http://online.wsj.com/article/SB123258304319904345.html
\_ given the choice, I prefer bank being nationalized, and
break up those are "too big to fail." The alternative
is asking tax payer to buy up all the bad investments from
without much consequences on these private bankers' part
really sicken me.
\_ The alternative is to stop the government from making these
stupid central planning decisions and let the economy recover on
its own.
\_ so, you are also against any of the bail out, right?

12/18 wtf is happening to my money market yield?
http://finance.yahoo.com/q/bc?s=^IRX&t=my
\_ spend spend spend! Only *YOU* can save the economy by
spending.
\_ I'm actually increasing my spending to some
extent over usual.
\_ Bargains to be had?
\_ No, I just feel sorry for everyone. It's
tough times and I have cash and don't need
credit to buy shit.
\_ I am spending more too, but that is mostly because
I keep seeing great deals on things like single malt
scotch, that I can't pass up.
\_ The Fed is printing money. The dollar is worthless, hence the
0& coupon auction recently. We are in for some serious
inflation eventually.
\_ The Fed is only "printing money" (through their new loan facilities)
in markets that are desperate for liquidity. This money supply is
probably preventing _deflation_ right now (which is much worse),
and can be quickly soaked up again to keep inflation under control.
\_ The Fed is only "printing money" (through their new loan
facilities) in markets that are desperate for liquidity. This
money supply is probably preventing _deflation_ right now (which
is much worse), and can be quickly soaked up again to keep
inflation under control.
\_ We hope. I don't think the Fed can inject $1T into the
economy and not cause inflation.
\_ This is because practically everyone in the world (including op)
is buying safe T-bills, driving down yields. Demand is outstripping
supply, which raises prices and depresses yield. Nothing to do with
the money supply.
is buying safe T-bills, driving down yields. The Fed is only
"printing money" (through their new loan facilities) in markets that
are desperate for liquidity. This money supply is probably preventing
_deflation_ right now (which is much worse), and can be quickly soaked
up again to keep inflation under control.
\_ What you say is all true except for the last sentence.

11/19 Remember the 100-age investment rule we learned in grade school?
For example, if you're 65, you should put at least 100-65=35% of
your savings in stocks. Let's say I'm retiring at 65 today, then
effectively I'd have 1/2 of that much than say, 2004-2005, or
35%/2. I've lost nearly 17.5% of my savings because I retired at
the wrong time. Buy and hold works well when the market is stable
(post 1940 and pre 2008). In the end, do you think the 100-age
rule is still applicable in the turbulent market of the 21st century?
\_ The average return you get is directly related to the amount of
risk you take on. Come back when you've groked that concept. -tom
\_ Hell. My 401(k) balance went from $200k a year ago to $120k today.
YetI still think stocks is the way to go.
Yet I still think stocks is the way to go if you don't need the
money in a short time. I've never heard of that investment rule
since I didn't attend grade school in this country, but I guess its
idea is that you don't need all your money today even if you retire
today.
\_ We are in basically the same boat here.
\_ I think you should be about 75% in equities (25% in bonds)
throughout. I don't plan to change that mix just because I'm
60, although I might cash out to buy some property once I can
do so without any penalties.
\_ No. Even at a relatively young age (under 35), you should be
invested >= 50% into safety (CDs and Treasuries). I think this is
particularly true for those earning the median or less where they
live. For those earning more, you can afford to risk more.
particularly true for those earning the median or less for where
they live. For those earning more, you can afford to risk more.
\_ You are on crack if you put >50% of your retirement into CDs at
age 35. You might not even beat inflation.

11/14 An overly long article directed to Obama on how he should fix the
farm/food system. I actually agree with some of his points, but
he does go little overboard toward the end.
http://csua.org/u/mxv (NYTimes)
\_ Forget the government, count on saving yourselves! This is a
GREAT time for you savers to wait it out, and in a few years,
everything will be super cheap and you'll buy properties
and stocks that'll go up tremendously when Obama-socialism
is over. This is the secret recipe that wealthy folks have
used for ages. Of course, if you never had a lot of savings,
then it's a different story.
\_ savings? what is left will be taken by the government
\_ Yes dear. That's nice. Now have some tea.
\_ What does this have to do with the farm bill?
\_ lulz

10/21 (Bloomberg) The Federal Reserve will provide up to $540 billion in
loans to help relieve pressure on money- market mutual funds beset by
redemptions. ... JPMorgan Chase & Co. will run five special units that
will buy up to $600 billion of certificates of deposit, bank notes and
commercial paper with a remaining maturity of 90 days or less.

10/12 Fannie and Freddie originated only 15% of subprime loans in 2006
Private firms made nearly 83 percent of the subprime loans to low- and
moderate-income borrowers that year.
http://www.mcclatchydc.com/251/story/53802.html
\_ But those horrid dark skinned people ruined our economy by letting
the Democrats force them to take home loans they knew they couldn't
afford. I think it was terrorist plot by all those muslim sleeper
agents that have been infiltrating our elected government for a
generation now.

10/8 Coordinated intl rate cuts
Ten year note up significantly even though equities down
-> potential "game over" (or ass-raping) scenario
In case anyone didn't see it yet, please see "Stock tip 3" from two
days ago
\_ I asked and he doesn't know what he's talking about. Now what?
You didn't give a single advice.
\_ well, my advice from 3 weeks ago was for the desired safe part
of your portfolio to be out 33% at 11388. I said back then that
this market could shitnap at any time so it was time to sell the
pop the next day.
My advice in "Stock tip 3" is: Don't go "all-in long" now in
case you're thinking about it.
Should you sell now, now that we're down to 9,270? It's your
call, but do your research and ask me a fundamentals question.
At this point I won't tell you to sell (but I will tell you to
"don't buy" index funds or the equivalent).
Actually, I will say I would go 80% into safe money right the
fuck now, but I'm not going to tell you to do that. It's your
money.
\_ I think it's time to buy. The market has overreacted.
\_ dude, the tip is: LEH CDS settlement in TWO FUCKING DAYS.
you don't hear this in mainstream news. i haven't been
playing a game with you guys for the last three months.
\_ what is LEH CDS
\_ lehman credit default swap settlement
financial institutions (including insurance co.'s)
will need significant cash to pay off insurance on
Lehman debt and other securities as a result of LEH
bankruptcy. these swaps are held around the world.
\_ oh i thought that all got sold to barclays
\_ only brokerage piece, because that has a whole
bunch of regular-investor money, I believe
\_ This is already priced in, imho.
\_ okay, I'm glad you're thinking though. IMO you
stand a better chance than people who haven't done
enough research to confidently say that.
\_ do you think the solvent finance firms will ask
for a gov. loan to help cover the costs of buying
the former assets of Lehman at firesale prices?
that would be ironic.
\_ if no one objects, sure! solvent financial
entities will be getting a whole lot of free
money. -op
\_ Well, I thought so last week and I was obviously
wrong. I am about 90% in right now and really
itching to go "all in" but the 10% that is still
out is my wife's IRA and she won't give the go
ahead. At some point I will start selling bonds
and buying stock, but I will probably wait until
Q1 for that. To clarify, I mean "all in" for the
65% of my capital that I risk in the equity
markets. I always keep about 6 months cash (that
works out to about 10%) 10% in US Bonds and 15%
in CA munis.
\_ marital bliss >> possible equity gain
besides, you already are 90% in. you'll be
a hero if you can sell at a good price.
a hero if you can sell at profit.
\_ I am pretty sure that by the time I
retire the stock market will be higher
than it is today.
\_ ^will be higher^return better than CD
rates -op
\_ Since the dividend yield on the SPY
alone is equal to current CD
alone is close to current CD
rates, it is hard to imagine how
I could go wrong. I guess all the
companies in the S&P 500 could cut
or eliminate dividends.

10/6 Prosper update: right now I have 15 delinquent loans. If they all
go into default, my profit this year will be 0.3%, which will make
this my best performing investment.
\_ How many loans do you have in total?
\_ Look at /tmp/prosper* if you're interested in some analysis I did
earlier this year.

10/3 House passes bailout by significant margin. Guys, THINK about your
long-term equity investments. You'll have PLENTY of people to blame
in the near future, but where will your money have gone? Please
consider the advice of a professional financial advisor, too, but
in the end, it's YOUR MONEY.
Practical advice: If you're not sure, move part into safety.
\_ Coherence isn't your strong point is it?
\_ WHAT is your problem dude?
\_ At 3% CD rates, subtracting taxes and inflation, you are losing
about 2%/yr with your cash position. This is a guaranteed way
to end up poor in your old age. Is that what you want? I have
gone from 0->$1M in 10 years, how have you done?
\_ Past performance is not a predictor of future results. The
specific reasons why have been what all my posts for the last
two months have been about.
I won't argue with you if you are confident in what you're doing.
Good luck. I sincerely hope you do well in your investments.
\_ Good luck to you, too. I think you should spend some more
time thinking about how to hedge against what imho is the
inevitable dollar devaluation to come. Sitting in Treasuries
is not going to cut it.
\_ thanks. fyi, that's exactly what I'm working on.
\_ I am buying lots of TIPS and have for a while now. If
the dollar falls then inflation should rise.
\_ This is not a bad call, but I assume you know about the
"upfront tax" costs of a TIP. This is not an issue in
a IRA.

9/25 Chase buys WaMu deposits, branches, whole mortgages and HELOCs
(all consumer and business accounts safe, even over $100K)
Pays $1.9B to FDIC
Debt, common stock, and preferred stock left in WaMu holding company
WaMu holding company taken over by FDIC
All WaMu branches will re-open tomorrow at normal business hours
(although now owned by JP Morgan Chase)

9/25 WaMu deposits and branches to be owned by Chase
Unclear what will happen to WaMu mortgages and debt - some say Chase
is taking that too
If I were to guess, JPM got another non-recourse loan from the govt!

9/25 In 1999 the Clinton administration pressured Fannie Mae "to expand
mortgage loans among low and moderate income people." The NYTimes
warned "But the government-subsidized corporation may run into trouble
in an economic downturn, prompting a government rescue similar to that
of the savings and loan industry in the 1980's."
http://tinyurl.com/4ulb87
\_ CLINTON AND BROWN PEOPLES FAULT!
\_ This American Life has already found the culprits:
http://www.thislife.org/Radio_Episode.aspx?sched=1242
\_ And in the same year, the LA times talked about how great it was
http://articles.latimes.com/1999/may/31/news/mn-42807
\_ http://www.whitehouse.gov/news/releases/2004/08/20040809-9.html
\_ Most non insane economists believe this month's troubles
are from the crazy securitization of home mortgages, not the actual
defaulted mortgages themselves. I am not quite smart enough to tell
if they are right.
Here in NYC Michelle Malkin keeps ranting in the NY Daily News
that its all the fault of illegal immigrants getting mortgages.
\_ McCain should have picked Malkin as his Veep, at least she
is articulate and no less batshit insane than Palin.

9/24 http://tinyurl.com/4qd8j3 [nyt]
"These two entities -- Fannie Mae and Freddie Mac -- are not facing any
kind of financial crisis," said Representative Barney Frank of
Massachusetts, the ranking Democrat on the Financial Services
Committee. "The more people exaggerate these problems, the more
pressure there is on these companies, the less we will see in terms of
affordable housing." (said in 2003)
\_ yawn, Barney Frank is a slimebucket. maybe not as bad as Lieberman,
but up there. -Dem
\_ yep, Barney Frank is a slimebucket. maybe not as bad as Lieberman,
but up there. Frank is also BFF with Hank Paulson. -Dem
\_ in 2003 were they?
\_ Read the article. Yes.
\_ What did Barney Frank do besides be extremely gay?
\- BFRANK isnt awesome like GOPAT but he is a far far far far cry
from LIEBERMAN who is basically a traitor [which is the Occam's
from Lieberman who is basically a traitor [which is the Occam's
Razor explanation of his behavior]. Just like CDOs have problems,
FMae and FMac have problem too, but the REAL PROBLEMS are CDS
which is insurnace not regulated as insurance [i.e. with reserve
requirements] and "new unregulated entities" entering into
which are insurnace not being regulated as insurance [i.e. with
reserve requirements] and "new regulated entities" entering into
the securitiezed mortgage mkt. If you want to understand this stuff
read the economists, not random journalists with undergrad econ or
english degree from Princeton who then went to CJS (clearly there
are some journos who are very good and look at the data and read
the research (in other fields say david cay johnson or laurie
garrett, or the boston dood who did the signing statement story
on BUSHCO) but most of them are just echo chamaber hacks ... e.g.
the all the journos who missed the boat on the entitlement problem
being focused on medicare not social security]. ok tnx. --jsl
read the economists, not random journalists with undergrad econ
degree from Priceton who then went to CJS (clearly there are some
journos who are very good and look at the data and read the
research but most of them are just echo chamaber hacks ... e.g.
the number of journos who missed the boat on the entitlement
problem being focused on medicare not social security]. ok tnx.
\_ http://www.businesspundit.com/sub-prime

9/22 Roaring 20s --> Great Depression
Roaring Millenium --> Great Depression II
\_ does our state have a BUDGET yet?
More concerning is we are about to hand $700B to one person and our
Fed chief Ben Bernanke fully supports this idea--and if you Dems,
Republicans, and libertarians haven't figured out by now:
He who controls the money has the power.
\_ Oh, I get it! In our crisis, we're appointing a Dictator.
\_ but he knows much more about finances than you do and he wants
to help you
\_ Right after he helps himself and his former i-banking
buddies.
\_ but Ben Bernanke supports the plan, and he has a Ph.D.
in Economics from MIT, did his dissertation on the Great
Depression, got his B.S. in Economics from Harvard, was
class valedictorian and got the highest score on the SAT
in his state when he took it. He wrote three books on
macroeconomics! He chaired the Princeton Economics dept
for 7 years before joining the Fed!
\_ Obviously smart and probably knows much more about
economics than I do. Perhaps not very wise, though.
\_ the idea that turning ONE knob in a stereo
system to make it sound pleasing to everyone,
is ridiculous.
\_ huh?
\_ Hey, we could have had Harriet Miers.
\_ Should he have seen this coming? He sure didn't
seem to from his past comments. Not that I'm blaming
him per se, since this is really complicated and
unpredictable stuff, but I don't feel like any of
these guys are sure how this plan is really going
to turn out. So it's basically a $700 B hunch/prayer.
\_ "Large amounts of risk, particularly
credit risk, have become concentrated in
the hands of relatively few derivatives
dealers, who in addition trade
extensively with one other. The troubles
of one could quickly infect the others....
[leveraged] derivatives severely curtail
the ability of regulators to curb
leverage and generally get their arms
around the risk profiles of banks,
insurers and other financial
institutions. Similarly, even experienced
investors and analysts encounter major
problems in analyzing the financial
condition of firms that are heavily
involved with derivatives contracts. The
derivatives genie is now well out of the
bottle, and these instruments will almost
certainly multiply in variety and number
until some event makes their toxicity
clear. Central banks and governments have
so far found no effective way to control,
or even monitor, the risks posed by these
contracts. In my view, derivatives are
financial weapons of mass destruction,
carrying dangers that, while now latent,
are potentially lethal." --Warren
Buffett, 2002
[Yes, he should have seen it coming. -tom]
\_ Predictions are all fine and good, and someone
is bound to get it right, but I don't think
anyone really saw it coming to this extent.
\_ Buffett wasn't making a prediction;
he was describing a risk. A large
portion of his business is managing
risk, and he's very good at it. He
didn't say "in fall 2007, some
weird activity by hedge funds will
trigger a liquidity crisis which
will eventually cause multiple
major financial institutions to
fail during calendar 2008." He simply
pointed out that the proliferation of
derivitive contracts in a deregulated
financial market set up a situation where
numerous institutions were taking on
risks they could not measure, and
declaring assets they could not quantify,
and that it was likely that some trigger
event would cause massive problems for
the entire industry. And it's not like
there wasn't any warning; the LTCM bailout
was a foreshock that was pretty much
ignored. -tom
\_ He described a risk and predicted it
would cause pain in the industry. I'm
just saying no one really thought it
would cause this much pain. Anyway,
back to the real point -- if the guys
on top didn't clearly see this coming,
then they probably don't clearly see
a way out.
\_ Or more likely, they just didn't care,
since it's "not my problem."
\_ The Invisible Hand will take care
of it.

9/21 Krugman on the Paulson "Plan":
http://www.nytimes.com/2008/09/22/opinion/22krugman.html
"... it will be crippled by inadequate capital unless the federal
government hugely overpays for the assets it buys, giving financial
firms โ and their stockholders and executives โ a giant windfall at
taxpayer expense....if the government is going to provide capital to
financial firms, it should get what people who provide capital are
entitled to โ a share in ownership, so that all the gains if the
rescue plan works donโt go to the people who made the mess in the
first place."
\- i dont think PAULSON is too bad, but this clearly has to be
decided by more than 1-2 people no matter who they are. and this
is one case where diversity would be a good thing, i.e. not ideal
if the dems say shoved RRUBIN into the process [also a GS elite
then to citgroup] ... better to have LSUMMERS, NROUBINI, PVOLKER,
JSTIGLITZ and various other non-tainted, not-super-ideological
finance or macro academics ... probably cant involve people now
in the private sector like MDELRAN].
\_ I'd be all for this if they included a provision limiting the pay
of every employee of these firms to 100k, just this year.

9/16 Fed to loan $85B to AIG while it sells its assets, since no one else
wanted to lend $85B. Hopefully the Fed gets back $85B--it's not clear
how long that may take (loan is for 2 years but may be extended).
\_ How the hell does the Fed have the power to make $85B loans without
congressional approval?
\_ exigent circumstances necessary to maintain stability of the
financial markets
\_ 85 BILLION! That's a pretty amazing amount of money.
\_ We spend more than that in Iraq every year. The Pentagon
as a whole spends that every two months.
\_ Financial markets are too fragile. We should clamp down
on this money is debt shit like from that one video. Is the
inflated money supply from bank credit really worth the
fragility introduced by their complex webs of interdependent
debt relationships? So much of the economy is built on top
of speculative vs. real assets.
\_ The Fed is a private entity, and is arguably the most powerful
organization on earth (even more so than the US gov).
\_ No one else has $85B to lend.
\_ correction: up to $85B, it's like a HELOC. Interest rate is 11%
on outstanding balance. regardless, Fed gets 80% equity (diluting
existing). -op
\_ URL?
\_ http://www.federalreserve.gov/newsevents/press/other/20080916a.htm
\_ BAIL OUT IS THE NEW IPO! Company in trouble? No problem! Just
keep spending. We'll get a bail-out... perfect exit strategy.
The more companies require BAIL OUT, the hotter it gets. It
is just like the dot-coms. BAIL OUT NOW!
\- i'm not an expert on this, but based on recent and not so
recent history BEAR STERNS almost certainly "deserved" a
bail out less than LEHMAN [BS played a very "me first" role
in various past episodes like the LTCM intervention (speaking
of people who didnt derserv a bailout) as well as in the lead
up to the eventual collapse]. LEH was a slightly better citizen.
But unfortunately "just deserts" has little to do with the
decision making. AIG is a quite evil company too, but its
hard to be gleeful over this ... although I am pleased to
see the self-serving probably criminal HGREENBERG taking a bath.]

9/15 Bank of America CEO Ken Lewis was just asked in an interview how many
banks there would be after 5 years, down from ~ 9,000 today:
"Gosh, I haven't, I haven't really thought about that. But, uh ...
maybe half."
Keep in mind the conversation took into account mergers.

9/15 Fed now accepts equity (stock) as collateral for loans.
Fed now allows banks to use checkings/savings accounts to fund
investment banking side.
Yay!
\_ "In this present crisis, government is not the solution to our
problem; government is the problem." -Reagan
\_ BRAIIIIIIIIIIINS! BRAINS!

9/12 When an agent tells you "This buyer is putting down 40% even though
he is willing to pay less than what you asked for..." Why would I
care about how much $ he's going to put down since the bank will
just cover the rest? Why should I care if he's paying cash or 0%
down? -real estate dumb
\_ a mortgage loan can be declined before the sale closes, even if
the loan was pre-approved by the bank
\_ Ah, risk factor. I get it, thanks.

9/6 http://tinyurl.com/6rnwlh (bloomberg.com)
"Growth in the economy in this decade will be the slowest of any
decade since the Great Depression, right in the middle of all this
financial innovation" - Paul Volcker
\_ Is volcker an idiot or respected? i can't remember.
\- ben stein: idiot. pvolker: respec
\- bstein: idiot. pvolker: respec

7/30 Financial aid question:
If a wife applies for financial aid do they consider
the husband's salary?
\_ yes
salary? What if the woman is partially through the program already
What if the woman is partially through the program already
when she gets married? Does that affect anything? Would it be in
\_ Doesn't seem to affect loans, except perhaps the ratio of sub
vs. unsub loans. Parental income (or more importantly lack of
income) can have an effect, even if the student is independent
of parental support and is married. And yes, for med school
you apply for fin aid in March every year. -sony
\_ don't you apply for financial aid every year? when you get
divorced, you won't be around the next time she applies for
financial aid
\_ What do you mean "I won't be around"? I don't remember applying
for aid every year, by the way. I seem to recall just
applying up front, but it's been a long time.
their financial interests to get divorced?
\_ sounds like a lot of work just to scam the gov. out of a few
thousand dollars.
\_ It is probably worth more than just a few. Our marraige tax
\_ It is probably worth more than just a few. Our marriage tax
is a few thousand dollars alone. -!op
\_ 1. It could be tens of thousands.
2. It's not a scam. If she has no income then she has no income
regardless if I make a good salary. The loan is her
responsibility to pay back, not mine.
\_ I don't think the IRS sees it that way. Real Accountants
please chime in, but if your wife is working, and you
are, you are pooling your income to provide food
please chime in, but if your wife is not working while
in school, and you are working your high salary
job, you are pooling your income to provide food
shelter savings trips to see the 'rents in the suburbs.
i dont think she really has no income. at the end of
the month do you bill your wife for shared expenses
like toilet paper and internet?
\_ does it work out that way if you're married? really?
i don't think so. so you're going to kick your
poor bankrupt wife out on the street later? i'm not
trying to be annoying, now I, not the op, am curious.
\_ You mean you don't itemize your wife?
\_ Her debts that she acquires after you are married
are community responsibilities. So yes, you have to
repay them.
\_ I don't believe this to be true. Why would you be
responsible if your wife goes wacky and applies for $3M
in debt in her name using only her income on the
application?
Addendum: The above is true (husband is responsible
regardless) in community property states, which are:
Arizona, California, New Mexico, Nevada, Idaho and
Arizona, California, New Mexico, Nevada, Idaho,
Washington, Texas, Wisconsin and Louisiana.
In Alaska, couples can opt in for community property.
You can file in community property states to make
property Sole and Separate (and back again), but
I wonder if you you can do that with debts.
\_ Many, many spouses "go wacky" during a divorce
and ruin both parties credit out of spite.
\_ Sounds like you need to move to a state not
on the above list if that happens.
3. So is the lesson here not to marry a medical student until
she's finished school or you'll hose her aid? That could be
years.

7/14 If you have any bank deposits over 100k, I would say now is the time
change that ASAP.
http://online.wsj.com/article/SB121605305718551305.html
\_ This sentiment is 100% correct. I'm not worried about you fools--
it's your parents and relatives. Small business owners have it
roughest because payroll can easily be > $100K.
\_ Just put your money in a bank like Well's Fargo or BofA.
\_ Wells is definitely a safe bet, but I'm not so sure about
BofA. Are you certain they aren't exposed? Keep in mind
that they bought Countrywide as well.
\_ I think they are both "too big to fail" though WFC is
certainly the stronger institution. I don't have $100k
in cash anyway, so it is all moot.
\_ What about Charles Schwab? Is it safe?
\_ I am buying KBE (seriously).
\_ Reversion to mean strategy? I'd say that's probably a good
short term bet and an extremely lousy long term bet.
\_ I actually think it is a good short and long term strategy,
though I will certainly take some profits on any move up.
\_ Why are you long on financials? Just playing
devils advocate, or do you have a good macro
justification? The problems with financials are not
purely sentiment, they have a solvency issue.
\_ No, I actually got 100% out of financials back in
Dec, when my stops got hit. I have been itching to
get back in and am starting to buy now. I think
this is a selling climax right now, brought about
by the IMB failure. I am sure some more banks will
fail, but not too many of them. I am looking at
a recently released (today) research report from
Citibank. They are saying that they are revising
BAC 2009 profit forcast down from $3.57 to $2.91.
This is a huge drop, to be sure, but implies a
forward P/E of 7. The banking sector will probably
recover in 2010, making it an even better deal then.
Buying on drops has worked our pretty well for me,
though I admit I am often early, like most
contrarians.
Check out the chart on these three the last time
we had a housing meltdown:
http://tinyurl.com/6pgkpm
\_ Update: the BAC I bought for 20 and change a week
ago is now up over 30.

7/11 IMB taken over by FDIC. Largest single S&L failure.
\_ Thanks Chuck Schumer for causing a run on the bank!
"The banking regulator said it closed IndyMac after customers began
a run on the lender following the June 26 release of a letter by
Sen. Charles Schumer, D-N.Y., urging several bank regulatory
agencies that they take steps to prevent IndyMac's collapse.
"In the 11 days that followed the letter's release, depositors took
out more than $1.3 billion, regulators said."
http://news.yahoo.com/s/ap/20080711/ap_on_bi_ge/indymac
\_ You have a strange way of placing blame.
\_ Schumer tipped it over the brink. You dispute this?
\_ IndyMac was going to die no matter what. You dispute this?
\_ American Savings and Loan in Stockton was bigger, according to the
WSJ.
\- i'd be very surprised if indymac was bigger than continental
illinois ... factoring in inflation and all that. continental
illinois was a money center bank in the top 10 by assets. --psb
\_ Indymac is the #2 largest behind Continental Illinois.
\_ Not to be pedantic, but wasn't Cont. Ill. a bank, not an S&L?
\- not to be pendatic in return :-) ...
that is a fair point, but since ~1980, the S&L vs (commercial)
bank distinctinction is basically trivial, i.e. S&Ls may
offer the same range of services and have comparable
regulations on investments (and have moved more and more
in the covergent direction since like getting rid of the
separate FSLIC). YMERA(barfin jake garn-st. germain,
DIDMCA, Regulation Q). See e.g. FMISHKIN book on post-New
Deal regulation of depository institutions. --psb
that is a fair point, but since ~1980, the S&L vs bank
distinct is basically trivial.
YMERA(garn-st. germain, monetary control act 1980)
i.e. S&L may offer the same range of services and have
comparable requirements investments. See e.g. MISHKIN book.
bank distinct is basically trivial. YMERA(garn-st. germain,
DIDMCA, Regulation Q). i.e. S&L may offer the same range of
services and have comparable regulations on investment.
See e.g. FMISHKIN book.
regulations on investments.
YMERA(barfin jake garn-st. germain, DIDMCA, Regulation Q).
See e.g. FMISHKIN book on post- New Deal regulation of
depository institutions. --psb
\_ Thanks Bush! Ownership society, indeed!

7/7 Mother, age 70, is thinking about putting money into fixed
annuity. I have absolutely 0 experience with annuity, and
I'm guessing they should be better than CDs since compounded
interest is tax deferred. Does anyone have old family members
who have annuities? Are they good? Are there other products
similar to annuities in terms of safety and slightly higher-than-CD
interest rates?
\- general/theoretical problem with annuities is it is a textbook
case of asymmetric information/adverse selection. [FYI: The classic
paper on adverse selection was by UCB Dept Econ professor GAKERLOF.
In a bit of a coincidence, he co-won with JSTIGLITZ, the economist
two threads up].
\_ useless advice. why even bother to write it?
\_ It's not advice. It is an observation and some trivia.
I'm not going to give somebody I dont know financial advice
via the motd. BTW, if you know what "adverse selection" is,
it is pretty obvious there will be some suboptimal pricing.
(i.e. if somebody is selling you health/annuity-type
income insurance with limited medical info).
\_ Have you not seen psb's posts before?
\_ I'm not the op, but psb's posts are usually in the
following format:
"There is an academic topic related to this"
"It is interesting, I've read a little bit of it"
<Stick some material and KEYWORDS in the thread>
"I am cool and smart and if you are like me, you'd
read it too."
(optional) ok thx
\- "Results 1 - 10 of about 97,600 for (annuity
"adverse selection"). BTW, yesterday [?] the FRESH AIR
program had a short discussion about annuities and
adverse selection (without using the term "adverse
selection" i believe), and sort of spells out why
individually negotiated annuities may be "a priori"
suspect due to overpricing.

6/25 I'm not a big clinton hater but why is Obama asking his supporters to
help her pay off her campaign debt? Her husband pulls in literally
100s of millions a year from speaking fees, why don't they just pay it
off themselves and move on?
\_ Or why doesn't Obama pay Hillary to do some stops for him out of
his massive not-publicly-funded warchest?
\_ So do you not care that McCain signed up for public financing
in order to get loans backed by that money back when he wasn't
sure he'd win the primary but then when once he won he said
oh wait, I'm going to back out of that public financing thing
haha, wait did I legally agree to do public financing. Well
fuck that. I'm not!
\_ Well first of all that wouldn't be legal...
\_ dunno. I really don't think Hillary is funded by $$ concerns.
\- First, the amount BCLINTON has access to is slightly
exaggerated. Let's say 10s of million. Second, to some
extent apparently helping with this kind of debt is to
some extent "standard practice". Third, particularly given
#2, it would probably have been "easier" to agree to it
than risk the lying and untrustoworthy Clinton people
making hay out of it (again, the inside story is the Obama
people are constantly worried about what the Clintons might
have up their sleave). Fourth, we'll see to what extent he's
just going through the motions. I agree Hillary has some
fucking gall to ask any body the exceptionally rich to do
this ... but there are some weird legal issues covering your
ability to raise funds for a campaign which is no longer
really in effect.
\_ Why don't you sign your name?
\_ The psb needs not sign his name. --psb #3 fan

6/18 http://tinyurl.com/5qckkp (telegraph.co.uk)
Hope you're all well positioned for the deflation in equities
The questions are: (1) when (2) how rapid (3) order (in various
markets) (4) how deep
RBS seems to think (1) mid-July peak (2) to September (3) in the
S&P (4) for a 22% loss from 1350 to 1050
I think analysts underestimate coordinated action by intl govts to
make sure big money gets their money out in time.
\_ Bears will always be with us.
\_ Bears will always be with us. Why would a European Bank be
complaining about a looming recession? The answer lies in how
bank profits rise when monetary policy is loose.

5/19 I have lots of student loans, all of which are in deferment
due to economic hardship (aka I'm too poor to pay them off
now). If I have a little bit of money available each money
($100-200), should I contribute towards paying them off
or is it better to contribute that money towards retirement?
Thanks
\_ Deferment as in you don't accrue any interest and you
don't have to make payments, or deferment as you don't
have to make payments but interest accrues? Also,
could you make the minimum payment if you were not
on deferment?
\_ Deferment meaning don't need to pay interest
but it does accrue interest. -op
\_ OK, if you start paying a minimal amount,
are they going to start demanding you
pay more and put you in a bind? Last,
what, of any, of this is tax-deductable?
\_ Nope, I can pay off however much I
want at any time, and it doesn't
affect anything else. But, I don't
know about the tax question.
\_ The tax question is kind of
important to answer your
question.
\_ Well if it's anything like
other student loans (and it
should be), the interest
accrued is deductible.
\_ It's better than deductible.
\_ OK, to summarize the deleted, the interest is tax
deductable. Next question: if you save your $100-$200/m,
can you make more than the interest on that $100-$200/m,
when you discount that interest by your Fed tax rate? I.e.,
when you enhance that interest by your Fed tax rate? I.e.,
suppose your effective Fed tax rate is 15%, can you make
>= .85x <student loan interest rate> on your $100-200/m?
>= 1.15x <student loan interest rate> on your $100-200/m?
\_ Or is this 1.0x? Or .85x?
If so, then you are better off keeping the money and
building up a nest-egg--from which you can pay the loan
later if the interest rate goes up, etc.
later if the interest rate goes up, etc. If you put the
money into a Roth IRA, the question is can you make >=
1.0x <student loan interest rate> on your $100-200/m?
\_ If it's accruing interest then you should pay it. Otherwise you
will be paying interest on interest, which is *BAD*.
\_ It depends on what the interest rate is on your student loans.
If it is less than 5%, you should certainly invest first, and
delay paying your student loans for as long as possible. If it
is higher than 12%, you should certainly pay if off (unless you
have some higher interest debt, like credit card debt). If it
is in between, it kind of depends on how good an investor you
think you are. You should probably error on the side of caution. -GS

4/30 Youtube video on $600 stimulus check costing you -$900/year for a
$200K mortgage (assuming you're getting a stimulus check)
http://www.tickerforum.org/cgi-ticker/akcs-www?post=42476
\_ Don't worry, oil will be tax-free for a while!!! Americans
rejoice!
\_ This video is over 30 seconds, or 100x times over the threshold
of an average American's attention span, and therefore, is a
very ineffective message. Secondly, he's using 4th grade
math, which is beyond the comprehension of 90% of the Americans,
and therefore, this is a very ineffective message. Thirdly,
he's trying to persuade people using logic instead of good
looks and charm (Ronald Reagan), and therefore, this is a very
\_ JFK
ineffective message.
\- i watched about 2min of that video. it is stupid. he spends
all his time on arithmetic rather than economics. the question
is "what will be the macroeconomic effects of the 'stimulus'
plan". why dont you look for something about this by brad delong,
paul krugman, even that semi-evil, smug greg mankiw, CBO etc.
paul krugman, even that semi-evil, smug greg mankiw etc
[i am assuming in the latter 2min of the video he doesnt talk
about velocity of money, balance of payments etc]. of more
relevance to mortgages is the part of the bill relating to
conforming loans ... but again, the actual effect of changing
the conforming loan cap is complicated].if we take "well known
borderline communist" lawrence lindsay's estimate for cost of the
iraq war in 2008 [http://en.wikipedia.org/wiki/Lawrence_Lindsey]
it will add more to the deficit than the stimulus, if you use
the CBO's estimate. And of course the 2009 cost of the one time
stimulus drops dramatically ... you think the 2009 cost of the
iraq war will be <$20bn? the interest on the debt is already
more than twice the cost of the stimulus etc.
about velocity of money, balance of payments etc.]

4/16 You thought gasoline was expensive now? You ain't seen nothing yet!
link:www.csua.org/u/las (Yahoo Finance, includes video)
\_ The free market will solve our energy crisis -dimwit #1 fan
\_ PEAK OIL alert. Also 'rationing by price' -- gotta love it.
\_ If the govt doesn't step in and do rationing, rationing by price
is how the market would do it.
\_ How many of you recall the gas lines of the 70s? Without
rationing by price we'll have lines *and* expensive gas, if
you can get it. Or oh hey we can do that whole even/odd
numbered plate thing again, yeah that was great. And don't
forget to ticket/fine/arrest any private citizen who dares
to give gas to anyone on the side of the road who runs out,
that was good for a laugh back then too.
\_ Dld that latter actually ever happen? I lived through
this, though I was quite young, but I don't remember
anything like that.
\_ Huh? What's wrong with 'rationing by price?' That's what the
market is FOR.
\_ Because when you ration nesseccities by price poor people
die. Old people die all the time in cold climates because
they can't afford heating oil.
\_ So how do you determine how much food/oil/whatever is
necessary and how much is beyond necessary? If you are
concerned about the poor then give them $$$ and let
them choose where to spend the $$$. That's still
rationing by price. I disagree with the idea that
every American should get a similar bundle of goods
that is "necessary".
\_ that's because you're an overprivileged twerp
\_ I forgot that you know what's best for people
more than they do. It's the leftist way to
boss people around.
\_ How do you "know" that freezing to death is
what is best for someone? Did they tell you
that?
\_ Can you read? "let them choose where to
spend the $$$" -!pp
\_ Nonono, the soviet style command economy
is clearly superior to western style
economics.
\_ We actually live in a mixed economy.
But you probably already know that.
\_ Sorry, missed that.
\_ Being able to survive a cold winter is pretty high
on the list.
\_ Some people have more tolerance for cold and
would prefer to spend the heating oil credit on
something more important to them like strippers
or booze or HDTV or whatever.
\_ Just wear a jacket at home. That's how I save on
gas bill.
\_ Cause where you live it regularly gets below 0F
\_ No, sorry. Government rationing will cause even worse
shortages and hurt even more people. Where do you
central control command economy guys get the idea the
government can actually make anything better? With gvt
imposed rationing you'll get a Soviet style system where
the rich and powerful get everything and the poor and
middle classes get nothing.
\_ And with no regulation, you get booms and panics
like in the 1880s. Why argue against the Straw Man
of a Soviet economy? Is your position so weak that
can't make your point any other way? Is there more
or less wealth inequality in Sweden or the US?
\_ A system in which everyone is equally poor is
a possible result and that wouldn't be a good
system. We can see examples of that in the China
of a couple decades ago, Soviet Russia, Cuba,
and so on. I don't think it matters how much of
the pie you get if it's a big enough pie. Everyone
sharing a small pie isn't a great alternative.
\_ That may be true, but it's a well known
psychological finding that people (a) care about
relative equality and (b) care specifically
about inequality of transferable assets, much
more so than other, much more 'unfair' and
blatant kinds of inequality. (There are some
interesting theories about how our attitudes about
fairness may have evolved which explain (a) and
(b)). -- ilyas
\_ I think most people in the USA don't care
or there would have been riots already. I
think people here assume (correctly) that
a rising tide lifts all boats. A wealthy,
powerful USA is something most Americans
desire and so far it has made us by far
the largest consumers in the world.
\_ Funny you should claim that right now.
Here is a front page article from the WSJ
that argues otherwise:
http://www.csua.org/u/lbj (WSJ)
(The rising boats opinion, not the
wealthy powerful America comment.)
\_ Do you think that people in Sweden, Denmark, The
Netherlands, etc are "poor"? Do you think that they
think of themselves as poor? The countries are
much more egalitarian than the US and people are
in general happier. And no one goes hungry or lacks
for housing or medical care.
Netherlands, etc are "poor"? Do you think that
they think of themselves as poor? The countries
are much more egalitarian than the US and people
are in general happier. And no one goes hungry or
lacks for housing or medical care.
\_ The Netherlands is a wealthy nation, but the
individuals are poor by American standards.
I say this as someone with a Dutch mother
and most of my family still living in Holland.
Sure, they aren't lacking in necessities.
On the other hand, they don't have any of the
luxuries people here have. I wouldn't eagerly
live their lifestyle nor that of my godfather's
Swedish ex-wife. Of course, someone who is
homeless would disagree. However, I think
overall the middle class in the USA is better
off than the middle class there. The rich are
rich both places. GDP per capita US is #2
in the world behind Luxembourg. Holland is
#16. Sweden is #25. I think our system,
while "unequal" benefits the citizenry more
than any other even though it's not "fair".
\_ But don't Dutch people consistently have
a higher "happiness" rating than Americans?
Food for thought. I believe Switzerland
comes out on top in that list, although
America is pretty high at number 20.
\_ Happiness can be acheieved with drugs.
It's not really something I aspire
to. YMMV.
\_ -1 to you, +1 to me.
\_ I am just saying that happiness is
a state of mind. I wouldn't
want to live in Third World
conditions just because the
people that do claim they are
happy about it.
\_ You were doing so good there for
a while too, after you dropped
the "a slightest bit of tax
increase is exactly equal to
Stalinism" line of argument, too.
Though you may in fact be
Stalinism" line of argument,
too. Though you may in fact be
another person, since your tone
is so different. But do you
really think that Swedes live
in "Third World" conditions? I
do not. The Dutch seem to have
quite pleasant lives and I have
been there many times. What you
say about the relative prosperity
of the middle class is no doubt
true, but all that junk that
Americans have doesn't seem to
improve their lives any.
say about the relative
prosperity of the middle class
is no doubt true, but all that
junk that Americans have
doesn't seem to improve their
lives any.
\_ That's pretty paternalistic.
-- ilyas
\_ I am one of those liberal
elitists you keep hearing
about.
\_ Good luck in the next
election! People LOVE
elitists!
\_ I am not running for
office.
\_ There may not be much of an oil trading system left by 2020 since
the "global economy" might be totally wrecked by nonstop warfare.
\_ Nonstop warfare? Caused by what? And fighting over what?
\_ Time to get a high gas mileage vehicle before manufacturers put an
SUV-like premium on them.
\_ Haven't they already?
\_ Yes on the hybrid ones, not yet on the regular engine ones.
\_ Get a bike as well!

4/11 Countrywide 12 month CD is 4.25%. But some people tell me they're
going out of business. Is it actually safe to deposit into
Countrywide right now? Will FDIC pay me the full amount + interest
should it ever goes out of business?
\_ Are you really that concerned about 4.25%? I could see if it
was 7% or something. How much more is that than the next best
rate you can find? Anyway, the Countrywide web site says that
is it is FDIC insured. FDIC will pay principal plus accrued
interest up to a total of $100,000.
\_ I'm putting down $20,000. Most rates are 3.00%, so by
putting into Countrywide I'll gain an extra 1.25% interest
rate or $250.00/year. That'll get me 2 good Chez Paniz
meals. I'll take it. -op
\_ Only if you eat by yourself and don't order wine, especially
after tax. How long will it take for you to recover your
money from Uncle Sam? Is $250 pretax really worth the risk?
\_ Patelco CU ( http://patelco.org ) is having a new member special
right now. 6.785% for 12 month CD. Existing members also
have a special rate of 4% 12 month CD for new monies.
\_ It says maximum amount of money you can put for 7%
is $1000.00. UH DUH.
\_ Ah, didn't see that the maximum is also $1000. Sorry
about that.

4/6 Famed Venice eatery offering discount to 'poor' U.S. tourists
http://www.csua.org/u/l8c
'A sign posted outside the restaurant at the weekend reads:
"Harry's Bar of Venice, in an effort to make the American victims of
subprime loans happier, has decided to give them a special 20 percent
discount on all items of the menu during the short term of their
recovery."'

3/31 Looking for a high-rate CD, recommendation please?
\_ In the US? You won't find one, you can thank the Fed for that.
\_ Ok fine. What's the highest CD in the US right now?
\_ Check http://countrywide.com. You can also go to http://bankrate.com for
CD comparisons. WSJ also lists highest CD yields at times.

3/24 Opinion: companies that require tax-payer funded bailouts should pay
for this privilege in advance as a kind of insurance. -- ilyas
\_ So you advocate a business tax? I don't think we need a new
business tax. I don't think we need bailouts either. Let them
take their lumps and retire with what they've already stolen.
Ban them all from every working in finance again to prevent
recycling these criminal idiots and let the markets recover
without government tampering. No bailouts. No silly taxes.
\_ No need for laws/rules, the free market will take care of it.
Requiring anything extra will stifle competition and make
US less competitive to other countries. No.
\_ It's very simple, if you want free taxpayer money in case of a
'catastrophe,' you need to pay the taxpayers a premium. This
isn't just about the latest financial meltdown, but also
airlines, farming, etc. -- ilyas
\_ Seems kind of redundant, given the presence of private insurance.
So I guess what you're saying is that companies should not be bailed
out. Which isn't very interesting but I agree.
\_ I am prepared to admit that bailouts might be necessary in
some cases, I just want to make the fuckers pay for this.
-- ilyas
\_ Yes, this is essentially what the FDIC is all about. It is obvious
that these IBs need a similar level of regulation. What pisses me
off is that the BSC shareholders are going to get billions from
the taxpayers. I was okay with a $2 (fuck you) bailout, because
I understand the risk to the financial system, but why $10?
\_ I'm fine with the shadow banking system getting a bailout, so
long as they're willing to submit to regulation and oversight
(just like ordinary commercial banks). If you want to operate
with impunity, that's fine, but you shouldn't expect the
goverment to swoop in and save your stupid ass when you mess up.
\_ The purpose of the bailout wasn't to protect the company,
but to build confidence in our financial system and to
prevent from market melt-down. Ultimately, the goal is
to protect the American dollar, hence everyone wins.
\_ It is more prudent to protect the American dollar by
regulating dangerous behavior by financial institutions,
than it is to let them screw everything up and then
bail them out. -tom
\_ I don't think anyone will disagree with you except
the it doesn't change the fact that dangerous behavior
already happened. It's as helpful as trying to preach
safe sex to people who already got a bunch of STDs.
\- "first you have at admit you have a problem^W^W^W^W
there was a bail out".
\_ What if there was no BSC bailout? Exactly what dire
effects for all of us are we trying to prevent? Dollar
devaluation, is that what you're saying? I think that
would be temporary. The broader macroeconomic policies
of the fed. gov't seem more important. In a larger sense,
bailouts undermine the entire market. The only real
accountability executives have is to their shareholders.
The only way to force that accountability is to make the
prospect of shareholders losing their shirts very real.
\_ There are real concerns of a domino effect; a BSC
failure would put liquidity pressure on all the other
institutions which hold BSC debt, which could lead to
more failures. Complete meltdown of the financial
system is not outside the realm of possibility.
Still, bailing out BSC sucks. -tom
\_ Yeah I mean, I would think they should let BSC die
ignobly, and even let a couple other dominoes fall
perhaps. Bail out when it actually does seem
necessary; let some smaller fish take over. I'm
skeptical of a term like "complete meltdown of the
financial system". I'm sure the most irresponsible
entities would like to trumpet themselves as being
key to the entire "financial system" and therefore
must be saved from their own mistakes. Just like
any corporate welfare is couched in noble terms.
\_ Yes, and this is exactly the problem with the
shadow system. Without any regulatory oversight
or standards, who really knows what is lurking
behind BSC? Maybe they really are the key!
Or maybe not...
I hate to drag out that hoary old quote from
Buffet about derivatives being "financial
weapons of mass destruction," but in this
case it seems warranted.
\_ Dire? Think of all the yachts that won't be bought
that year! My God! Think of the yacht makers'
children!
\_ LANDLORD WITH A YACHT!
\_ Go read up on the panics the economy used to routinely
experience in the late 1800's, with unemployment in
the 20%+ range and bank runs and get back to me with
any questions.
\_ http://www.usagold.com/gildedopinion/greenspan.html
\_ The Financial Times agrees with you, as do I. -ausman
http://www.csua.org/u/l4i
\_ Why don't you point us to something? And also say
what your point is.

3/14 Fed provides emergency financing to BSC via JPM as other banks refuse
to lend to BSC at fed funds target
Fed to take on all credit risk for BSC collateral used to obtain
financing
http://online.wsj.com/article/SB120550108028136579.html
On Monday, BSC said in a statement, "there is absolutely no truth to
the rumors of liquidity problems"
http://www.bloomberg.com/apps/news?pid=20601087&sid=aa874wpC8wcg
\_ Someone please translate this to plain English?
\_ You went to Cal?
\_ Read the WSJ article. WSJ = Wall Street Journal. If you have
q's, come back.
\_ The wsj article seems reasonable clear. In any event, here is
my understanding:
Bear Stearns Co. (BSC), a large NY investment bank, may not
have enough money to meet its obligations. J.P. Morgan (JPM)
has borrowed money from the Federal Reserve Bank (Fed) and
loaned it to BSC to ensure that BSC has enough money to meet
its obligations. JPM, unlike BSC, is not technically an
investment bank, and therefore it may borrow money directly
from the Fed.
JPM is merely acting as a conduit for the Fed's loan to BSC.
BSC has pleged its assets to the Fed as security for the
loan. If BSC's asserts drop in value, then the Fed, and the
loan. If BSC's assets drop in value, then the Fed, and the
taxpayers, will take the loss; JPM is not taking on any risk.
\_ Why would we care? I mean, we're already borrowing a lot
of money and our deficit is huge, why can't we just borrow
more? I mean, if you owe the bank $1 million dollars,
the bank owns you. But if you owe the bank $100 trillion
dollars, then you own the bank.
\_ Which is why the dollar is doing oh so well on the
international market right now.
\_ 99 yen to 1 dollar!
\_ Personally I am concerned about the level of debt the
government takes on. I do not know if bailing out BSC
is better than the alternative, which is to let if fail.
I guess we have to trust that the Fed knows what it is
doing.
\_ The Fed is in panic mode:
"The Fed's role in the deal suggests federal officials
fear a systemic collapse of the U.S. financial system
were Bear Stearns to fail. The fear stems from Bear
central role in a multitrillion-dollar web of
interconnecting derivative contracts."
\_ Probably. Something about this situation reminds me
of the LTCM fiasco a few years back.
\- I dunno how old you were in 1998, but the funny
part of this is Bear Stearns is the banks that
part of this is Bear Stearns is the bank that
refused to play ball ... the scrappy outsider...
during the "genteel" bailout of LTCM. It's also
amazing to read about the arrogance of the LTCM
insiders dictating terms of the bailout. Just
unfucking believable.
\- I dunno how old you were when LTCM happened, but
the funny part of this is Bear Stearns is the
bank that refused to play ball ... the scrappy
outsider ... during the "genteel" bailout of
LTCM. It's also amazing to read about the
arrogance of the LTCM insiders dictating terms
of the bailout. Just unfucking believable.
\_ I didn't remember that BSC was one of the
hold outs during the LTCM bailout. That is
so ironic.
Re arrogance of LTCM insiders - Being a
nobel prize winner and 'furd prof goes to
some people heads.
\- it's not just merton and scholes.
YMWTR: http://tinyurl.com/rcrv8
\_ Deregulating the financial system was a mistake.
\_ Libural socialist rant! Why do you hate America?
\_ Yeah, me and FDR. Known America haters.
\_ FDR hated America, not only did he
sell out this country at Yalta, he
also instigated the New Deal which
was pratically communist.
was practically communist.
\_ Whoa! When the did the Birchers show up
on the motd?!
\_ Time to return to a gold and/or silver standard!
-rpaul
\_ Time to put Glass-Stiegel back in place.
Though it is too late for this recession, at
least it will keep the next one from being
as bad. I fear we will see a New Deal style
nationalization of the banking system before
this is all said and done.

3/7 http://www.ofheo.gov/media/hpi/AREA_LIST.pdf
Conforming loan limits are now $729,750 for the San Jose-Sunnyvale-
Santa Clara area. Even more for a duplex. Expiring end of 2008.
Buy-buy-buy!
\_ This only lasts till end of 2008 right? It's suppose to
save the presidency or something.
\_ How do I find out my area?
\_ "housing, it only goes up!"
"They aren't making any more land!"
"Buy now, before you get priced out!"
\_ I am glad I bought in 2002, before I got priced out...
\_ Where would you have gotten priced out?
\_ San Francisco, specifically Noe Valley
\_ Just wait. Given real value decreases I'm sure we'll
be back around 2002 prices fairly soon.
\_ You are sure that Noe Valley is in for 50% drop
in real prices soon? I am sure you are wrong.
Are you one of those bitter renters, perhaps?
\_ No. By the way, "bitter renter" accusations are
essentially a Godwin equivalent at this point in
the housing mess. The last thing that any
renter is right now is bitter.
\_ Nonsense. The bitter renters have been harping
on the motd for years. If they had bought
back then they'd still be above their purchase
price and would actually be on their way to
owning something instead of supporting their
landlord's yachting adventures.
\_ It is not really a yacht, just a 32 foot
wooden sailboat...
\_ Does that Koolaid taste good?
\_ Nationally, home equity levels are the lowest
ever. They'd be renting from the bank like
the rest of America.
\_ Up 50% after the all the drops. It
tastes *great*! Thanks for asking.
How is your landlord doing lately?
Better than you I'd wager.
\_ Nationally, home equity levels are the
lowest ever. They'd be renting from the
bank like the rest of America.
\_ Which has nothing to do with prices and
everything to do with individuals taking
money out of their equity to buy toys.
That has nothing at all to do with the
economy, housing, or anything. Just
people being dumb and greedy. I did
not take out anything when I refi'd and
every month I own a bit more.
\_ So are you or aren't you predicting a real
drop in Noe Valley home prices of 50% "real
soon"? Can you define real soon a little more
precisely please?
\_ Hard to tell, but I'd expect within a time
frame of 5 to 7 years. Depends a lot on
whether the dollar continues to become
more worthless, which I think is a good bet.
\_ Home prices have traditionally done
okay in a period of high inflation.
Not great, but not that bad, especially
if you have a mortgage that is getting
inflated away as well. Where would you
\- yes you are paying with inflated
dollars, but some of you house
apprecaition is nominal appreciation.
rather keep your assets? Gold? And even
if your rather pessimistic prediction
comes true, I will have lived in a place
for 10 years for the cost of mortgage +
taxes + maint - tax break, which is
already less than rent for me.
\_ I'm sure you'll be fine, given that
you didn't buy in the truly inane
bubble periods and you probably have
a pretty sane loan. And I'll be
a perfectly happy "bitter renter"
on the sidelines until I need to buy
and prices are a little more
realistic. But this conforming
limit change certainly does not
mean "buy buy buy." For more on the
requirements for "jumbo conforming"
see here:
http://csua.org/u/kzo
(calculated risk)
The DTI, LTV, and re-fi requirements
seem daunting to me. Won't be
surprised if these end up costing
more than a traditional jumbo.
\_ I would not buy today either. Or
in 2005-2006, when things were
crazy. To tell you the truth, I
was kind of nervous buying even in
2002. But I guess it all worked
out, barring a huge deflationary
period (that is when people with
$1/2M loans really get screwed).
\_ I was certain I was buying
at the top in 2001 and boy
was I wrong. It's hard to
predict tops/bottoms so just
buy when you can afford to.
\_ Certainly home owners will do better
than renters in an inflationary economy;
mortgage payment relative to income will
decrease, while rent will not.
By the way, from what I can tell from the rules on these
"jumbo conforming loans," the price savings in the end as compared
to normal jumbos will be a wash.
\_ Bitter renter?
\_ Happy renter, but thanks for the generic troll. By the way,
the DTI requirement on these new loans means they aren't gonna
change much of anything, at least not in the Bay.
\_ I say bitter renter because you cared enough to check. If
you're so happy what's it matter what the requirements are
or what effect they will/wont have on prices?
\_ Curiousity, and a general fear that the economy is about
to go in the dumper. There are other reasons to care
about this stuff than house envy.
\_ It doesn't matter what the economy is doing: so long
as you have skills and some cash on hand, you'll
be fine.

3/6 Housing, Bank Troubles Deepen
Foreclosures set record
Aggregate equity drops to 47.9%
http://online.wsj.com/article/SB120485071664018195.html
"Housing, it always goes up!"
"Buy now, before you get freezed out!"
"They aren't making more land!"
"We're special!"
"... if you own something, you have a vital stake in the future of our
country. The more ownership there is in America, the more vitality
there is in America, and the more people have a vital stake in the
future of this country."
\_ So far anyway, this is actually true.
"... if you own something, you have a vital stake in the future of our
country. The more ownership there is in America, the more vitality
there is in America, and the more people have a vital stake in the
future of this country."
future of this country." -Dubya

2/12 What is the profile of a person defaulting home loan? I mean,
are these type of people under-educated? Risk takers? High
school drop-outs who desperately want to own homes? And why
are they in certain areas (Inland Empire, etc)?
\_ They run the gamut. If the loan officers were all of a sudden willing to
give them a loan, even though they previously didn't qualify, and they
want a house, who are they to object. "I sign my name saying I'll pay it
back. But if they give me the money, that must mean I can pay it back.
Because otherwise the government would tell them not to give me the money."
\_ They run the gamut. If the loan officers were all of a sudden
willing to give them a loan, even though they previously didn't
qualify, and they want a house, who are they to object. "I sign my
name saying I'll pay it back. But if they give me the money, that
must mean I can pay it back. Because otherwise the government would
tell them not to give me the money."
\_ in another word people with lower than avg intelligence,
who mostly congregate in SOUTHERN CALIFORNIA like our dimwit
\_ There are fewer foreclosures in places like SF because
the market is stronger. That's all. Look at Sacramento
for NoCal "stupidity".
\_ SF markets did not go up as much as in LA, mostly because
people were not dumb enough to sign a bunch of loans they
couldn't afford, so the bubble wasn't as bad here. Only
in the NorCal burbs are people that stupid.
\_ Southern California style left wing is not
MAINSTREAM AMERICA.
\_ one oddity about california is foreclosure laws here make it hard for
the lender to persue assets beyond the property on which the loan
was taken out. This takes a most of the risk out of defaulting on
a loan for a 'underwater' property.
\_^left^right
\_ one oddity about california is foreclosure laws here make it hard
for the lender to persue assets beyond the property on which the
loan was taken out. This takes a most of the risk out of defaulting
on a loan for a 'underwater' property.
\_ unless you re-fi'd
\_ They are San Jose engineers making $100K+ with a $740K mortgage
\_ Yes, but being a state with trust deeds instead of mortgages
mitigates that somewhat, as it is much easier to foreclose
on a trust deed.
\_ They are San Jose engineers making $100K+ with a $740K mortgage now
who bought at $275K in 1995
http://www.nytimes.com/2008/02/12/business/12credit.html
\_ "... when he refinanced his home in Northern California to take
cash out to pay for his daughter's college tuition."
Yeah, blame it on the daughter. Stop playing good parent. Did
he pay $465K+ for his daughter's college tuition? There's
probably some European vacations and a BMW that he's not
mentioning.
\_ People have an amazing ability to rationalize away their
mistakes and put the blame on someone else. Too bad, they
lose a chance to learn something when they do that.
\_ I know someone who bought a house in Berkeley *knowing* she was
going to lose the house. 5 figure salary, really bad credit, not
a very convincing person. Didn't matter. They gave her a huge
loan knowing she couldn't pay it and she knew she couldn't. I just
don't understand.
\_ The market is broken because all parties involved are shielded
from the consequences of their behavior by the government.
\_ Tell that to JP Morgan and Citibank. The mortgage securitization
conduits did not look at the paper they were packaging. Greenspan
turned a blind eye, and did not enforce what little mortgage
underwriting regulation there is. Or use FedRes' considerable influence
to stop the BS.
\_ Tell that to JP Morgan and Citibank. The mortgage
securitization conduits did not look at the paper
they were packaging. Greenspan turned a blind eye,
and did not enforce what little mortgage underwriting
regulation there is. Or use FedRes' considerable
influence to stop the BS.
\_ So what are the consequences? I haven't paid much attention
honestly but I haven't heard of any high profile people
getting fired or anything.
\_ Oh Jees. Something like a dozen CEOs have lost their
jobs in the last six months. But no one in the White
House, it is a "responsibilty-free zone."
\_ you mean they they found an excuse to take their
golden parachute early.

2/6 I want to open up a money market account, and I'm debating between
an ING Direct acct and a ETrade one. Which one is preferable?
Should I just go with the ETrade acct since it offers 4.4%
interest (vs. the 3.4% offered by ING)? Thanks.
\_ Are you worried about ETrade going belly up?
\_ Go for Etrade, and when their rate tanks switch to another service.
ING Direct has really low rates, I no longer use them. Make sure to
check out other services like Emigrantdirect, GMAC, IndyMac, etc.
I'd stick to Etrade since they're well established and their teaser
rates (currently 4.4%) seem to last longer than any of the other
places. Good luck and tell us what you ended up deciding!
\_ I like GMAC because transactions post very quickly, you can
write checks from the account, they have ATM fee reimbursements,
and their rate is almost always quite competitive.

1/24 Yay! Conforming loan limit to be raised to $625,500 for Santa Clara
\_ What does this mean? -not a homeowner, but want to learn
\_ Housing loans under X amount get goverment funded loans that
are at lower intrest rates. A jumbo loan is a loan for over
that amount and intrest is about 1 1/2 percent more. By raising
the cap they are basically making more expensive houses cheaper
to buy (cause the intrest rate is less, and loans are easier to
get.) They are trying to reinflate the bubble. Yay?
\_ I see, so what prevents stupid people from getting exactly
$625,500 for the first loan and another $300,000 for
the second loan? And how do you look up the rate
limit for the area you live in? Thanks. -pp
\_ Until recently the limit was country wide. Don't know
how the look up works. As to the second, you could
do that but because how second mortgages work they tend
to be even higher intrest rate. (Basically if a house
forecloses and is sold the entire first mortgage is paid
off before the second mortgage gets a crack at it, I'm
not sure how liens work.) Some people do manage to get
a cheaper deal by doing what you suggest, but it still
more expensive than not needing a jumbo loan.
\_ piggyback loands are done ALL THE TIME. it's cheaper
than one huge jumbo. of course, if you have the down
payment, then a single conforming is best of all.
the conforming limit is currently $417K countrywide
except hawaii and alaska (+50% higher).
the proposed plan says median price of the "metropolitan
area" + 25% should be the new cap. however, the numbers
need to be made consistent between the house/senate
versions, looks like feb 15 is target sign date.
\_ it's an experimental erectile dysfunction pill for the CA real
estate market, FDA approval and short-/long-term effects TBD
Santa Clara = rock hard
East Bay = softening
San Bernardino = flaccid
\_ !swami says this is step one for a complete federal (i.e.
taxpayer) bailout of the mortgage mess (i.e. banks).
\_ !swami also says this is basically legalized theft.

1/16 Nikkei 225 back to lows of 2001-2005 and 1986. Dang. I thought
stock markets of developed countries were supposed to return more
than a savings account over 22 years!
\_ If you cherry pick your dates, then no it won't. If you cherry
pick the other way you'd be a zillionaire.
\_ i guess we're supposed to wait 40 years?
\_ No, you're supposed to not cherry pick the dates. Or better
yet, just put your money in your piggy bank.
\_ If you are really interested in this topic, I suggest that you
read _Stocks_For_The_Long_Run_ by Siegel. Plenty of developed
countries stock markets have gone all the way to zero, usually
after they lost a war. If you held German stocks from 1933 to
1945, you were pretty unhappy. On the other hand, if you bought
the Nikkei back in 1950, you are still sitting on a very impressive
gain. The Nikkei is *still* not back to where it was in 1989, so
yes, you can cherry pick dates and demonstrate practically anything.
Diversification and a long term view are essential for success
investing, especially passive investing, like the stock market.
You should not have money in stocks that you need in the next
20 years. -ausman
\_ Guys, conventional wisdom is that you should invest in a market
index and hold x years, and you're virtually guaranteed to do okay.
What is "x" for returns better than a savings account / CD / bonds?
-op
\_ Wrong assumption. The stock market gives you likely better
returns than a more conservative option like a CD, with
a probability curve that starts at x and rises towards 100%
over time. -tom
\_ Also you have to diversify to prevent being really
screwed when one sector/company/country tanks for 20 years.
\_ what do you estimate the probability of a market index
outperforming CDs is for x = 30 years? do you have a sweet
spot for x? let's also assume we are moving from stocks
to bonds/safety as we get older, also as CFPs suggest.
to bonds/safety as we get older, as CFPs suggest.
\_ You could estimate this by looking at historical
30-year returns and seeing how many of those
periods resulted in returns less than 5%/year
average. I expect that probability is very low, less
than 10%. -tom

12/12 http://online.wsj.com/article/SB119746804568523549.html
Fed offers term auction facility to address credit freeze
- Effective operation almost exactly like the Fed discount window:
Banks can borrow money from the Fed at weeks to months duration
- But at or near the fed funds target (instead of the discount rate)
- The key feature (not discussed in the article of course) is
Anonymity. Only the Fed will know who it lends to using this
facility. Banks don't borrow from the discount window because
it's public knowledge, telling the world that no other bank will
lend to you so you had to go to the discount window.
- The Fed is on the hook if the borrower goes belly-up, so it will
decide who gets how much in loans for how much collateral
- Starts next week for $20B and is envisioned as an ongoing program
- Fed also lent $24B to ECB and Swiss central bank to help Europe's
banks with SIV/CDO implosion. Central banks also relaxing
collateral requirements.
\_ Expect the taxpayer to get screwed in the end.
\_ privatize profits, socialize losses bitch!

12/10 Does anyone on motd actually know someone else using 0% down
interest only home loans? I don't, and I can't imagine any
Berkeley grads stupid enough to do so.
\_ I knew someone who got a 105% loan but she got lucky, didn't get
fired, and converted a year ago. She was not a Cal grad.
\_ Of course I do. It's not really stupid. It's something smart
people do all the time. The product is really intended for
developers and/or investors who know what they are doing and
the risks involved or else disciplined people who have a
fluctuating income (e.g. small business owners who pay a
massive chunk of principle at the end of each quarter/year when
they had good business and have the extra cash). Most people never
pay their mortgage off anyway (until they sell) and principle is
such a small part of the payment that it can make sense to not
commit to it. I would have done it if I could have gotten a better
rate that way, but usually you won't. You just pay principle when
you want to, but you're not committed to it. In my world,
that's smart.
\_ principal
\_ Ironically, I spelled it "principal" and then checked the
web which had it "principle". The web site I looked at
was retarded and you are correct.
\_ I know someone who got their townhouse in DC that way. She is a
Cal undergrad and Yale grad school grad. I talked her into refi'ing
into a 30 year fixed rate about 18 months ago. She was planning on
doing it anyway, when her rate reset this year, but I think she
is glad she listened to me and did it early.
\_ Variable rate and interest only are two different things
completely. She could've refinanced into a fixed rate
interest only if she wanted.
\_ It was actually both a variable rate and an interest only
loan (with a higher rate variable 2nd, making it a no
money down loan as well). Were people actually signing up
for fixed rate, interest only loans? What was the term, i.e.
how long was the loan for? Life?
\_ Works just like variable rate except the interest rate
doesn't fluctuate.
http://tinyurl.com/2npzy8
\_ Not how I think of it. Those are 5 or 7 year fixed
rate loans only, they vary after that, so they are
really ARMs.
\_ Um, no. Some are fixed for 5 or 7 years and some are
fixed for the life of the loan. Look at the Smart30
offering and compare to SmartChoice:
http://tinyurl.com/2lcyub
Both are interest-only.
\_ Those are still only fixed for 10 years. An
interest-only loan, by definition, would never
get paid off, so it is kind of silly to claim
that the loan rate is fixed for the "life of
the loan." The Smart30 converts to a standard
fixed rate fully amortizing loan after 10 years.
\_ Are you an idiot? I hate to call names,
but read the damn link! They are fixed for
the life of the loan! Read the column that
says "fixed-rate period". What does it
say? Term of loan! Term of loan is not 10
years. Jeebus! How it's amortized has
nothing to do with the rate being fixed or
not. The loan may *never* be paid off and
it could still be at a fixed rate! That
this loan has a 10 year interest-only
period has nothing to do with whether the
rate is fixed or not.
\_ Yes, I read the link. You don't understand
what you are talking about. No one offers
a loan of infinite duration, which is what
a fixed-rate, non-amortizing loan would be.
The Smart30 is an interest only loan for
10 years, then a standard 20 year fixed
rate fully amortizing loan after that. They
both have the same interest rate, yes.
\_ No one is talking about amortization
here but you! You said "Those are 5
or 7 year fixed rate loans only, they
vary after that" which is WRONG.
Then you said "Those are still only
fixed for 10 years" which is also
WRONG! When I showed you proof you
started talking about amortization. WTF?!
I have completed all the coursework
to be a mortgage broker, so I
definitely know what I am talking
about and you are a buffoon!
Further, your reading comprehension
is terrible. I never said any of
those loans were infinite duration,
but certainly such loans are possible -
and with a fixed rate, too! I'll
make you one if you want it!
\_ Interest-only means the same things
\_ Interest-only means the same thing
as non-amortizing. You are really
clueless if you don't realize that.
Show me a fixed-rate, interest only
loan of inifinite duration, I would
loan of infinite duration, I would
be amused to know of it. As far as
I know there have only been a few
cases of this kind of note in history.
http://www.csua.org/u/k7p (tutorial)
http://www.csua.org/u/k7q (history)
Read about the losrenten and the
consols. You are talking about setting
up a perpetual annuity.
\_ You are going off on a tangent
now. Please to be acknowledging
that your two above assertions
about fixed-rate loans were
wrong and then we can talk about
amortization (or not).
\_ My initial question was "what
is the term for the fixed-rate,
interest only loan?" which you
have never really answered
except with nonesense like
"the entire term of the loan
you idiot!" Yes, I glanced at
some of the links and thought
that the longest interest only
loan was 7 years, when it was
actually 10, but you still have
not even come close to answering
my initial question. What you
call a "tangent" is actually
my initial question. Work on
your own comprehension skills.
And yes, we use the word "vary"
to mean different things. You
use it to mean the interest
rate varies, while I use it to
mean the payment varies. I think
that is the root of our
confusion.
\_ I think it was clear what
you were talking about
when you used the term
ARM and you were incorrect.
\_ My original question was:
"Were people actually signing up
for fixed rate, interest only
loans? What was the term...?"
So no, this is not a "tangent"
as you call it, it is the
original question. Your response
"the life of the loan" makes
no sense, unless you are
claiming a perpetual annuity.
It is actually kind of amusing
that you claim I have reading
comprehension problems,
considering I got a 750 on the
verbal part of the GRE. Perhaps
the communication problem is
not really on my end.
original question.
\_ What does "ARM" (a term
you used and which has
a clear meaning) mean on
your planet? You said
"Those are 5 or 7 year
fixed rate loans only, they
vary after that, so they are
really ARMs" which is
WRONG and "Those are still
only fixed for 10 years"
which is WRONG. You
have yet to demonstrate
any real understanding
of the subject or
acknowledge your
misunderstanding, so
it's pretty clear you
are the idiot here. You
are a textbook case for
why standardized
testing is USELESS.
BTW, the answer to your
question about the
length of the loan is
in the URL I provided.
\_ You don't know what the
word "vary" means in the
English language. You
think it only means to
vary the interest rate,
but it can also mean to
vary the payment amount.
Perhaps your mortgage
training taught you this
jargon, but that is not
how it is used by regular
English speakers.
\_ No one talks about
"variable payments"
w.r.t mortgages
and you are the
one who used the
term "ARM" which
means Adjustable
Rate. You are out of
your depth here.
Admit that you
didn't know what
you were talking
about, thank me
for educating you,
and move on.
\_ Go to your own
website:
http://tinyurl.com/2npzy8
"At Quicken Loans, we offer
a variety of interest-only
loan options, including [...]
adjustable-rate mortages..."
Then you claim that I was
"WRONG" for calling them
ARMs. Is an adjustable-rate
mortgage an ARM?
\_ You're a fucknut. Of
course an adjustable rate
mortgage is an ARM. The
point here is that you
are talking about RATE
not PAYMENT when *YOU*
used the term ARM. You are so
fucking inconsistent
and a revisionist to boot.
\_ I am merely quoting your
own comments directly
from earlier in the thread
I never called the
Smart30 an ARM, you just
made the wild assumption
that I did. All I said
is that it wasn't fixed
and it clearly is not,
since the payment varies
after 10 years. You made
the assumption that I was
referring to the interest
rate, but I was not. You
are a textbook example of
why a little knowledge
is a dangerous thing.
Furthermore you said:
"Those are 5 or 7 year
fixed rate loans only, they
vary after that, so they are
really ARMs" which is
WRONG". What do you call the
SmartChoice loan, from your\
own URL? It is a 3,5, or 7
year Interest-Only ARM, just
like I said. Go ahead and
admit you were wrong here.
A little confession is good
for the soul.
\_ I'm done with you. You
are all over the map
in trying to defend
your losing position,
you are stubborn, and
you are a waste of my
time. Thank me for
educating you, which
I did, and give it up.

12/2 http://tinyurl.com/2lgwc2 (signonsandiego.com)
Old mortgage:
2004-2007 4.97% interest-only on $352K
2007-2009 7.97% to 11.97%, principal payments start
2009-2034 11.97%
New mortgage:
2004-2007 4.97% interest-only on $352K
2007-2010 5.25% interest-only
2010-2034 5.25% principal payments start
Countrywide is da b0mb!
\_ Moral of the story: it doesn't pay to be fiscal responsible.
\_ Lame. "Oh we didn't understand the terms of our ARM. We're too
dumb to read the papers right in front of us. We thought we were
getting a free lunch because we're nice people. Now, only because
the rest of the mortgage industry is fucked, we get totally lucky
and keep a super low rate forever".
\_ Countrywide can tell them to go pound sand. It's the free
market at work like it should be. What I have a problem with
is the government attempting to legislate these discounts
or, worse, making taxpayers pay the bill.
\_ All the deficit spending is effectively a tax. We are getting
taxed out the ass.
\_ This is a non sequitur.
\_ Well, it's related to fiscal irresponsibility. Someone
always pays the bill in some way. Legislating discounts
for idiots passes the bill onto responsible people.

11/29 I just found out that I am American Indian. The White Man took
away my ancestors' ancestral lands, stuck them in camps, you know,
the usual. I am perfectly functional member of society. What
are some cool ways I can take advantage of my status? Can I
get cheap loans? Grants? ok tnx.
\_ What percentage and what tribe? I understand that With some tribes
you can get grants, or casino funds. I think for most tribes you
don't get jack. But, IANAI.
\_ Become an alcoholic.
\_ Can you prove it? There are lots of Native Americans who cannot
prove that they are because of poor documentation. If you can't
prove it then forget it.
\_ Live on the Res.
\_ Tell us what tribe and I might be able to tell you your chances of
getting anything from this, but: you need to be enrolled, the tribe
doesn't have to enroll you even if you qualify on paper, most tribes
with money require that you live on the res and despite what some
motd posters think, the typical tribe member is not sitting in that
casino hotel jacuzzi snorting coke with $100 bills.
\_ Are you crazy? Try $20 bills.

11/19 Prosper update. I am getting 13.3% on my loans there, but one of them
is now 45+ days lates. If that one is a write-off, as seems increasingly
likely, my ROI will be about 11% over my first year there. Not too
shabby, but we shall see how it goes as this credit crunch thing
plays out. Lately I have been getting better rates, but I suspect
the risk is higher, too.
\_ that is awesome. How much was your initial stake?
and what are your parameters for which ones you invest in?
\_ I am only taking AA, A and B rated borrowers who have a debt/
income ratio under 30%. My initial stake is just a couple
thousand, as I am just sort of checking it out for now.
\_ Who verifies this debt/income ratio?
\_ Prosper does.
\_ How?
\_ How are you getting more than a credit card loan?
\_ The magic of the market? The invisible hand at work? How
do you expect me to answer this question? This is what people
with reasonably good credit are willing to pay to borrow money.
Not AA credit, but B credit, with a low Debt/Income and home
owners to boot. I could get more, but then my default risk
would go up, too.
\_ Maybe people are willing to pay more on the bet that if they
default you are less likely to send them to collections?
\_ No, all defaulted debt is automatically sent to collections.
\_ No, all defaulted debt is automatically sent to
collections.
\_ How many loans have you made over that period?
\_ Around 50.
\_ I looked at prosper when it was first mentioned on the motd. I
wouldn't risk a penny on any of those people. I'm glad you've
made some bucks but your risk looks way higher than the interest
rates these people are paying. There's a very good reason they
can't get money from more traditional sources.

9/19 http://Prosper.com, earn 9.40% return on your investment:
http://www.prosper.com/prm/lender2.htm
\_ Lisa needs a loan, Joe has money. Lisa doesn't pay Joe back, Joe
is screwed!
\_ I have been doing this with some "play" investment money for about
a year now and have been earning just over 10%, with no defaults
so far. -ausman
\_ And if you got just ONE default, what would your earning be?
\_ About 3/4 of that. I only lend to B or better credit risks.
These have been at under 2% default on Prosper, at least so
far. I also make lots of small loans, to spread the risk. -aus
These have been at under 2% default rate on Prosper, at least
so far. I also make lots of small loans, to spread the risk.
I actually wish I had more cash to invest in Prosper right
now, since the rates being paid have gone up quite a bit
recently, but my wife's kitchen remodel is using up all
the spare cash.
\_ But your wife's kitchen remodel will probably pay back
over 10% !!!

9/18 So, the lesson of the fed rate cut is: borrow as much as you can, get
way over your head, make risky investments as well. make big bucks on
the way up. if you get into trouble, the Fed will bail you out. if
you're a saver you're a sucker... your life savings just took a hit
through dollar devaluation.
\_ If you are a saver you ALWAYS take a hit through dollar devaluation
\_ I've been busy the last few days... I thought they were going to
let everyone bite it. What sort of bailout did the Fed do?
\- "If you owe your bank a hundred pounds, you have a problem.
But if you owe your bank a million pounds, it has." --jmk
BTW, this is an example of why taxes should be progressive.
\_ It's amusing that you jump on progressive taxation to remedy
this particular problem rather than, you know, eliminating
bailouts. -- ilyas
\- progressive taxation isnt a solution to this.
this is an illustration of the fallacy of some of
the "how should we split the dinner bill" type bogus
analogies.
\_ The best argument for progressive taxation I know is
that marginal benefit increases exponentially, but
hedonic value increases logarithmically (if that),
for money. -- ilyas
\_ Investors and risk takers will always do better than nervous
nellies. You would rather the whole economy suffered a recession?
\_ They're not taking risks if the government bails them out. And
considering that the only reason the economy is in danger of
suffering a recession is *because* of this kind of risk taking,
it shouldn't be encouraged. -tom
\_ I think you'd have a hard time substantiating your last
sentence.
\_ Investors, probably, risk takers? That's ridiculous. The kind
of fevered speculation that goes on in these "booms" is not
sound business and should not be encouraged. But unless those
who do this feel pain, it won't stop. And it does endanger the
economy. The "lemming" mentality should not provide safety
from stupidity.
\_ Yeah, I don't approve of fevered speculation and lemming
mentality either. Feel better?

8/17 http://tinyurl.com/383pmp (latimes.com)
L.A. Times reports CFC bank web site slow, so customers crowded branch
offices to transfer out money that exceeds FDIC coverage
\_ Panic on the streets of London. Panic on the streets of
Birmingham. I wonder to myself, could life ever be sane again?
\_ Panic isn't insanity.

8/10 http://tinyurl.com/2vz45a (iht.com)
Fed accepts MBS bonds, kicking back $35 billion in cash to banks in
short-term loans, delaying mark-to-market valuations on the bonds
(encouraging mark-to-Fed accounting schemes).
\_ http://www.csua.org/u/jbd (Economist's View)
That is not really an accurate summary of what really happened.
The MBS were all Agency backed and therefore gov't guaranteed
in the first place. Secondly, they did not buy them, they
accepted them as collatoral for a very short term (72 hour)
loan.
More discussion about it here:
http://www.csua.org/u/jbe
(I know you don't like this blog, but unless you can find a
better source of economic explaination, too bad emarkp) -ausman

4/30 I'm starting business school in September and looking at various
financial aid schemes (have not been able to until now for numerous
reasons.) I'm in school in France, and need info on non US govt-
related loans. Can someone recommend a good resource or book(s) for
this? Thanks! -John
\_ Unless the loan interest can be deferred or is lower than
inflation, it is not worth it. I do not know of a single
non-gov loan that allows you to defer or has a low rate,
therefore, it is not worth getting the loan esp. given the
fact that you're quite well off and don't *need* the loan.
Lastly, 99% of the loans are not geared towards people going
to professional schools, so... good luck with that.
\_ What the heck would the French know about business? Anyway,
I would contact a banking institution. They are the ones who
are going to bankroll you. Also, your school should have info.
\_ It's INSEAD, it's in France and Singapore (one of the top 10
intl. MBA mills, so not really "the French".) I'm checking
out Graduate Leverage -- I'm not "well off", and unfortunately
the guys who supplied most of the previous somewhat reasonable
(i.e. not demanding an arm AND a leg) rate loans to INSEAD
students just stopped doing so, leaving a lot of people in the
lurch. I'm also grateful for any recommendations on compilations
of non-govt. scholarships if you have any. I know that with
bank loans I'm going to get reamed. -John
\_ Let's step back a bit. You have a vacation home in Chile,
your dad paid all of your tuition, you paid for your
crooked Swiss doctor to get out of conscription,
you travel to places like Bangkok, and lastly you have a
super hot high maintenance high funding girlfriend.
You're probably not as well off as your Swiss boarding
school friends but you're well off by UCB standard.
\_ You know, he might have blown most of his income
on all of the above and have not much of anything
saved. I doubt his dad wants to bankroll him anymore.
Though perhaps he could sell his vacation home in
Chile, though that may only be worth $50k or something.
\_ the place in Chile is a rental paid for by his
girlfriend's job. she's working down there.
\_ Yup. "Crooked Swiss doctor" was an investment to
keep me out of mud push-ups without pay 2 weeks a
year, "dad paid all of your tuition" was largely
bonds, and I have enough savings to cover about
half of b-school (would be better off except for
ill-considered dot-com investments.) I love the
insinuations, thanks for the constructive advice.
And it's "UCB standards." If your parents help you
with your tuition, it's considered respectful to at
least reward them by showing you did some elementary
learning while at school.

4/28 Reviews on money market/direct accounts as of April:
ING Direct: 4.50%. Takes about 3-4 days to transfer to/from your
bank accounts. Can link up to 3 accounts. The UI is very
simple and the security is very good (random keypad that
requires the mouse). Adding a new account requires you
to send them a void check.
\_ I recently opened an account with ING direct and linked it
to my checking account. I did not have to send them a
voided check; the process was the same one you describe
below for Emigrant Direct.
\_ Yes first account is easy, 2nd and 3rd link requires
a void check. Stop interrupting my post asshole.
\_ Also have "all electronic" interest-bearing checking
account. You can transfer money to any other bank
account. Will also mail checks.
Emigrant Direct: 5.05%. Takes SEVEN days to transfer to/from
bank accounts. The UI isn't as intuitive as ING but it
is quite decent. Linking accounts requires you putting
in bank routing+account, and when they deposit/withdraw
2 amounts, you put that in. High interest rate, but
takes too long to transfer in/out of the account.
PayPal: 5.04%. Takes 3-4 days. High interest rate and low
transfer time. I'd transfer all of my money into it
except I've heard a lot of bad things about PayPal's
security.
\_ Anyone try HSBC Direct?
\_ Vanguard Prime Money Market: 5.10%. Takes 2-3 days. Quite reliable,
none of this fuzzy, hand-waving "ACH is unpredictable" bullshit.
$3000 minimum balance, $100 increments, tho.
\_ Amtrustdirect, 5.36% APY, $1000 minimum. Website isn't as good
as ING.
\_ Note that even for, say, $10k, the yearly income difference
between 4.5% and 5% is $50. I suggest basing your choice
primarily on features rather than interest rate. -niloc